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Strategic Report
Governance
Financial Statements
Strategic Report
02 Highlights
04 At a Glance
06 Chairman’s Statement
08 Market Overview
10 Our Business Model
12 Our Strategy
14 Chief Executive’s Review
16 Key Performance Indicators
18 Financial Review
20 Divisional Review: Agriculture
24 Divisional Review: Engineering
28 Risk Management
31 Viability Statement
32 Corporate Responsibility
35 Non-Financial Information Statement
36 Stakeholder Engagement
Corporate Governance
38 The Board
40 Chairman’s Introduction
41 Corporate Governance Report
46 Nomination Committee Report
49 Audit Committee Report
53 Remuneration Committee Report
67 Directors’ Report
Independent Auditor’s Report
Financial Statements
70
78 Consolidated Income Statement
79
Consolidated and Company Statements
of Comprehensive Income
80 Consolidated and Company Balance
Sheets
82 Consolidated Statement of Changes
in Equity
83 Company Statement of Changes in
Equity
84 Consolidated and Company Statements
of Cash Flows
85 Principal Accounting Policies
95 Notes to the Financial Statements
141 Five Year Statement
143 Alternative Performance Measures
Glossary
145 Directory of Operations
146 Dormant Subsidiaries at 29 August 2020
147 Registered Office and Advisers
Carr’s is an international business at the forefront
of innovation and technology.
The Group is a global leader in the supply of
value-adding products and services to customers
in the Agriculture and Engineering sectors.
Agriculture
The Agriculture division includes a livestock supplementation
business which manufactures feed blocks, boluses and other
trace element supplements from locations across the UK,
USA and Europe.
These products are supplied through an extensive distribution
network to farming customers across the globe.
In the UK the division also sells animal feed, fertiliser, animal
health products, oil, farm machinery and rural supplies from
a network of country stores and depots.
Engineering
The Engineering division designs and manufactures
specialist equipment and components, robotic goods and
remote handling equipment, and provides technical
services, from five sites in the UK, one site in Germany
and two sites in the USA.
These highly specialised products and services are supplied
predominately into the nuclear, defence, and oil and
gas markets.
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Carr's Group plc Annual Report and Accounts 2020
01
Strategic Report
Highlights
A robust
performance in a
year of significant
challenge
02
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Operational highlights
Financial highlights
• Robust performance in a challenging
year, demonstrating the benefits of
the Group’s diversity
• COVID-19:
£395.6m
Revenue
4.75p
Dividend Per Share
a. Health, safety and well-being of
employees remains of paramount
importance
b. Dynamic global business
2019
2018
£403.9m
£403.2m
2019
2018
response including rigorous
health and safety regimes
adhering to government and local
guidelines, ensuring businesses
remain operational to support
customers
c. Close financial and operational
monitoring and controls including
contingency planning
d. No material financial impact
during the year overall
• Challenging H1 in UK Agriculture
largely mitigated by strong H2, with
increased deliveries and collection
model adopted to maintain supplies
to farmers during COVID-19
lockdown
• Continued growth of Supplements
business internationally, and launch
of new FesCool® and Pick Block
products
• Engineering performance impacted
by project delays, restricted access
to customer sites owing to COVID-19,
and weakened oil price
• Strong performance by NW Total in
first full year as part of the Group
• New Global Robotics showrooms
opened in Japan and USA
• Strong cash and net debt position
£16.2m
Adjusted Operating Profit*
£13.8m
Reported Operating Profit
2019
2018
£18.9m
£17.5m
2019
2018
£14.9m
Adjusted Profit Before Tax*
£12.5m
Reported Profit Before Tax
2019
2018
£18.0m
£16.6m
2019
2018
11.9p
Adjusted Earnings Per Share*
10.3p
Basic Earnings Per Share
2019
2018
14.6p
13.9p
2019
2018
* Adjusted results are consistent with how business performance is
measured internally and is presented to aid comparability of performance.
4.75p
4.50p
£17.2m
£16.4m
£16.3m
£15.5m
13.1p
13.0p
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Carr's Group plc Annual Report and Accounts 2020
03
Strategic Report
At a Glance
Carr’s Group plc is an international business operating
across Agriculture and Engineering sectors which
supplies products and services to over 50 countries
around the world.
Revenue by
division
Agriculture
Engineering
£342.6m
£53.0m
Adjusted
operating
profit
by division
Agriculture
Engineering
£13.4m
£3.8m
The Agriculture division develops and manufactures a range of
innovative livestock supplementation products under highly
regarded brands which are distributed to customers globally.
The division also services UK farming and rural communities through
a network of retail stores, supplies specialist equipment and
machinery, and distributes fuels.
Locations
Our Supplements business develops
and manufactures products from three
sites in the UK, six sites in the USA and
one site in Germany. These products are
sold through a vast distribution network
across the UK, Europe, North America,
South America and Australasia.
Our UK Agriculture business operates
predominantly across the north of
England and southern Scotland from
a network of retail stores, machinery
distributorships and fuel depots.
Customer base
Our customer base includes leading
livestock farmers across the globe in
the dairy, beef, sheep, pig and equine
sectors.
Brands
Our branded product ranges are
the result of extensive research and
development and include feed blocks
sold under the Crystalyx®, Horslyx®,
SmartLic® and Megastart® brands, and
boluses sold under the Tracesure® and
Allsure® brands.
Agriculture
For more information,
see pages 20-23
Locations
50
UK
6
USA
1
Germany
04
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Engineering
For more information,
see pages 24-27
The Engineering division designs and manufactures bespoke
equipment, and provides specialist technology and engineering
solutions, for the nuclear, oil and gas, defence and petrochemical
industries.
Its diverse range of products and services includes robotic
manipulators and remote handling equipment, life-of-plant extension
technologies, radiation protection and decontamination services,
equipment condition monitoring, specialist design and fabrication
and precision machining.
Locations
Our Engineering division is spread across
eight key sites globally; five in the UK,
two in the USA and one in Germany.
From these sites we supply products
and services worldwide across Europe,
North America, South America, Asia,
Africa and Australasia.
Customer base
Our customers include global businesses
and government bodies across nuclear,
energy, pharmaceutical and utilities
industries worldwide.
Product ranges
Our range of innovative products and
services include TELBOT® remote
handling equipment, MSIP® life-of-plant
extension technology, Power Fluidics™
waste mobilisation systems and nuclear
decontamination services. We also
supply specialist design, fabrication,
testing and precision machining services.
Locations
5
UK
2
USA
1
Germany
Carr's Group plc Annual Report and Accounts 2020
05
Strategic Report
Chairman’s Statement
In difficult market conditions the
Group delivered a robust financial
performance, responding well to
the challenges arising from the
COVID-19 pandemic.
Peter Page
Chairman
06
Carr's Group plc Annual Report and Accounts 2020
Review of the yearFor the year ended 29 August 2020, in difficult market conditions the Group delivered a robust financial performance, with full year profitability slightly ahead of the Board’s revised expectations. Across both divisions, the Group responded well to managing the challenges arising from the COVID-19 pandemic. First half trading in the Agriculture division was characterised by both challenging market conditions affecting farm incomes and continued unseasonal weather in the UK and USA. Trading in the second half of the year recovered well, and overall profitability exceeded the Board’s revised expectations for the year. As COVID-19 restrictions were tightened, the UK Agriculture businesses proved adept in maintaining supplies to farmers whilst keeping people safe. In the Supplements business, new and innovative products were launched, and expanded production and research capabilities supported our international footprint, particularly in New Zealand and Canada where feed block sales continued to build. In the Engineering division, the first half of the year was impacted by contract phasing. Whilst it had been expected some of this would recover in the second half, delays in receiving expected orders on overseas projects meant that this was not the case. Restrictions imposed on travel and access to customer sites as a consequence of COVID-19, together with the weakened oil price, also negatively affected the division’s full year performance with profitability below the Board’s revised expectations.At the onset of COVID-19, all sites moved quickly to follow government guidelines and implemented a range of safety measures including social distancing, increased hygiene and shift-working. People worked from home where possible, maintaining strong engagement with our customers, suppliers and each other, using virtual media. Contingencies were planned across both divisions, which remain under constant review. Strategic Report
Governance
Financial Statements
total dividend for the year of 4.75 pence
per share (2019: 4.75p). The final dividend,
if approved by Shareholders, will be paid
on 15 January 2021, to shareholders on the
register on close of business 4 December
2020, and the shares will go ex-dividend
on 3 December 2020.
Corporate governance and
Board succession
This has been an important year for
Board succession. After joining the Board
in November 2019, I took over as Non-
Executive Chairman following the AGM
in January 2020. In October 2020 Kristen
Eshak Weldon joined the Board as an
Independent Non-Executive Director,
bringing international experience of
investment appraisal along with real insight
into new technology applications in the
agri-food sector.
In August 2020 we announced that Tim
Davies would be stepping down after seven
years as CEO of the Group. On behalf of
all shareholders, I am extremely grateful
to Tim for his dedication and contribution
to the business. Tim’s leadership style
and genuine concern for colleagues have
been most evident since March 2020 as
everyone has come to terms with different
ways of working, heightened levels of
uncertainty and increased demands on
the business. Tim will leave the Board at
the AGM in January 2021 but will remain
available to give advice and share his
knowledge during a handover period.
Hugh Pelham joins Carr’s Group as CEO
in January 2021, standing for election at
the AGM. Hugh has relevant experience
in developing and growing businesses
and integrating them into larger group
structures, he has worked in many markets
around the world, and he has developed
high performing management teams. I look
forward to welcoming Hugh to the Group.
As part of its long-term succession strategy,
it is planned that Alistair Wannop will stand
down from the Board at the conclusion of
the AGM in January 2022. Alistair was first
appointed to the Board as a Non-Executive
Director in September 2005. Given the level
of Board succession achieved during 2019
and 2020, and recognising Alistair’s deep
knowledge of the Group’s activities and
understanding of agricultural industries, the
Board considers it appropriate for Alistair
to remain appointed for another year to
ensure continuity.
AGM January 2021
In the light of the COVID-19 pandemic, the
AGM on 12 January 2021 will be held in a
revised format. As shareholders will not
be able to attend the meeting in person,
the Board will be inviting shareholders to
vote on the resolutions proposed by proxy,
and to submit any questions in advance
of the meeting. We will be publishing a
broadcast on the Company’s website,
reflecting on the year, providing an update
on current trading, introducing Hugh
Pelham, and answering questions raised by
shareholders, following the AGM on
12 January 2021.
Our people
Carr’s employs over 1,100 people across the
globe, all of whom have made a significant
contribution to the business this year,
particularly in the demanding situation
arising from COVID-19. I am extremely
grateful for everyone’s support, endurance
and adaptability.
Outlook
The Group remains committed to building
value by focusing on markets with growth
potential, diversifying its international
footprint and differentiation through
innovation and technology.
The global economy has been dominated
by COVID-19, creating uncertainty and
making forecasts difficult. Nevertheless, the
Group is well positioned as the agriculture
sector remains crucial in supplying raw
materials and ingredients to the food
chain, and our engineering businesses are
predominantly involved in government
funded contracts in the nuclear sector.
Management will continue to focus on
optimising all the businesses in the Group.
Trading in the new financial year has
started in line with the Board’s expectations.
Whilst uncertainties remain in the broader
economic environment, the Board is
confident about the prospects of our
business in the medium term.
Peter Page
Chairman
23 November 2020
Carr's Group plc Annual Report and Accounts 2020
07
Financial reviewRevenue for the year decreased by 2.0% to £395.6m (2019: £403.9m). Adjusted operating profit was down 14.2% to £16.2m (2019: £18.9m), with Agriculture contributing £13.4m (2019: £14.7m) and Engineering £3.8m (2019: £5.9m). Reported operating profit fell by 19.5% to £13.8m (2019: £17.2m). Adjusted profits are before amortisation of acquired intangible assets totalling £1.4m and restructuring and closure costs of £2.0m offset by adjustments to contingent consideration totalling £0.9m, giving a net total adjusting items of £2.4m.Adjusted profit before tax was down 17.4% to £14.9m (2019: £18.0m) and reported profit before tax decreased by 23.4% to £12.5m (2019: £16.3m). Basic earnings per share were down by 21.4% to 10.3p (2019: 13.1p), with fully diluted earnings per share of 10.2p (2019: 12.8p) and adjusted earnings per share down 18.5% to 11.9p (2019: 14.6p).Net debt at 29 August 2020, excluding leases, was £18.9m (2019: £20.9m). This movement included £18.1m generated from operations, £8.9m used in investing activities and £3.3m paid in dividends. The recent leasing standard IFRS 16 has been adopted in the year, with a consequential reduction to opening net assets of £1.4m as operating leases were brought onto the balance sheet. There was also a consequential impact to the income statement of an additional charge to profit before tax of £0.1m resulting from the new standard.With the onset of COVID-19, the Group implemented a rigorous cash forecasting process which is tested regularly against a variety of scenarios. Cash management measures were also implemented to limit non-essential expenditure. Whilst an interim dividend decision in April 2020 was deferred, this was subsequently confirmed and reinstated in July 2020 once the short-term impact of COVID-19 on the business became clearer. Such measures preserved the Group’s strong cash and net debt positions, leaving good headroom on the Group’s committed banking facilities.DividendThe Board is proposing a final dividend of 2.5 pence per share which, together with the interim dividend of 2.25 pence per share declared in July 2020, makes a Strategic Report
Market Overview
Our vision is to be recognised as a truly international
business at the forefront of technology and innovation
in our chosen markets.
Agriculture
Market
trend
Global agriculture
Livestock sector
Population is the key determinant
of total food use. Income, relative
prices and consumer lifestyles,
meanwhile, determine a person’s
desired food basket.
Global livestock production is
expected to expand by 14% over the
next ten years, supported by low
feed prices and stable
product prices.
On accou nt of an expected 11%
expansion in the global population
over the next ten years, as well as
notable gains in per capita income
in all regions, total consumption of
food commodities is expected to
rise by 15%.
What this
means for
Carr’s
Our key agricultural markets
are likely to continue to expand
over a ten-year perspective with
enhanced productivity being a key
driver for farmers.
Our primary market segments
of global dairy, beef and sheep
production are expected to remain
in growth over the coming years.
Growth will increasingly vary
regionally across the globe. Our
global footprint puts us in a strong
position to respond to changes in
levels of demand.
UK policy and
environmental challenge
In the UK, Brexit and the passing
of a new Agriculture Bill will herald
the biggest shake-up in agriculture
seen for a generation or more.
Environmental concerns will
increasingly impact food
consumption and farming practices,
especially in developed countries.
Production projections, based
upon current policies and available
technologies, suggest a growth in
direct greenhouse gas emissions
of 6% in the next ten years, with
livestock accounting for 80% of
this increase.
The UK market is heading into a
period of significant change leading
to changing farmer demand and
opportunities to which we can
respond positively.
Responding to climate change
is also likely to become an
increasingly important issue at
farm level.
15%
Predicted increase in consumption
of food commodities over the next
ten years
14%
Expected growth in global
livestock production over the
next decade
6%
Estimated growth in greenhouse
gas emissions from global
agriculture in the next decade
08
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Engineering
Market
trend
Civil nuclear
Defence
Oil and gas
The requirement for nuclear
decommissioning and legacy waste
clean-up operations continues to
grow globally.
In coming decades, it is expected
that a significant number of nuclear
reactors will be retired from use
globally which, together with a
growth in subsidised renewable
technologies, is expected to
increase demand for products and
services in the decommissioning
market.
Investment continues in the UK
defence sector with a committed
spend of £31bn for the Dreadnought
programme; the building of four
nuclear submarines at Barrow
-in-Furness.
The Submarine Dismantling Project
is expected to continue into the
2040s, costing at least £10.4bn
to decommission the redundant
submarine fleet of 27 boats.
Oil prices started 2020 strong at
c. $61/b in January but dropped
to a price of c. $40/b as a
consequence of reduced demand
attributable to the COVID-19
pandemic. It is estimated by the US
Energy Information Administration
that the oil price will average at
c. $50/b in 2021.
What this
means for
Carr’s
Continued growth in these highly
regulated markets will increase
demand for robotics products,
decommissioning technologies
and the manufacture of waste
transportation containment
packages.
Lifetime extensions at nuclear
facilities, and the demand
for enhanced power plant
safety, require safe and proven
technologies which presents
opportunity for our solutions such
as MSIP® and Dynamic Natural
Convection.
12%
Annual global growth spend in
nuclear decommissioning
Continued long-term investment
by the UK Government in defence
provides significant future
opportunities to utilise technologies
across the Group. Carr’s has a track
record of delivering products and
services into this highly regulated
and growing market, and is well
placed to further develop its
divisional capabilities to support
customers in the sector.
In the short term, those of our
UK Service & Manufacturing
businesses which serve oil and gas
markets are focusing on overseas
opportunities. In the medium-term,
those businesses continue to
diversify the markets they serve
to further reduce reliance on the
oil and gas sector.
Oil and gas companies are
investing in their green agenda
with opportunities arising in
decommissioning to clean up their
oil and gas environmental footprint.
£31bn
Value of UK Dreadnought nuclear
submarines programme
$40/b
The current oil price, to which the
market is having to adjust
Carr's Group plc Annual Report and Accounts 2020
09
Strategic Report
Our Business Model
Diversified, innovative,
How we create value
Investment
in innovation
& technology
We continue to grow by investing in our
people and assets, and through
carefully considered acquisitions which
align with our strategy. We apply this
approach across both our Agriculture
and Engineering divisions, centred
around a strong focus on innovation
and technology.
Innovation and technology
During the year we continued to develop
new products across both divisions.
We also made significant investment in
our people, and in process efficiencies,
to ensure that we can deliver the best
levels of service and add the most value
to our customers globally.
10
Carr's Group plc Annual Report and Accounts 2020
Our Supplements business launched two new
products during the year: FesCool® in the USA
and Pick Block in Europe.
Research and product development remain
at the core of our business which enables
us to remain at the forefront of innovation in
our markets.
We also invested during the year in enhancing
manufacturing plants in our US Supplements
business to maximise efficiencies and ensure
that they continue to consistently produce the
best quality products.
e
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A
g
n
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n
g
n
of services we offer to customers. E
i
We also invested £1.3m in state-of-the-art
machinery at our UK Service & Manufacturing
site in Carlisle, bringing large-scale machining
capabilities in-house and enhancing the range
During the year our Global Robotics business
opened showrooms in the USA and Japan to
further develop opportunities internationally.
Diversified, innovative,
sustainable
How we create value
Our resources
Who we create value for
Strategic Report
Governance
Financial Statements
Talented
people
We place great value in our global
workforce and are committed to
continuous development. People are
critical to our success and we strive
to provide environments in which our
employees can reach their potential.
Global
distribution
network
As a Group we have a diverse customer
base spanning over 50 countries
worldwide. Our strategy is to target
markets with the potential for growth on
an international scale.
Deep
knowledge
We have a strong focus on innovation
and technology. Our businesses possess
a wealth of specialist knowledge and we
continue to invest in the development of
new products and solutions which can
add value to our customer base.
Well
invested
We continue to invest in our businesses
to ensure that they remain best placed to
deliver our strategic objectives.
Long-term,
trusted
relationships
We are proud to have built longstanding
and trusted relationships founded
upon the quality of our offering, our
organisational culture, and our levels of
customer service.
Market-
leading
Culture and
values
Our businesses have market-leading
brands and products which are
recognised internationally including
Crystalyx®, AminoMax®, Tracesure®,
SmartLic® and FesCool® in Agriculture
and TELBOT®, MSIP® and Power Fluidics™
in Engineering.
As a Group we have a clear set of
values and are committed to investing
in and engaging with our employees
and other stakeholders to ensure that
our businesses remain ethically and
sustainably managed.
Employees
We continue to expand our employee
training and development offering and
enhance our engagement initiatives.
Customers
Our success can be measured by the level
of custom we continue to attract and retain
through our leading product ranges and
excellent service levels.
Investors
Our strategy is designed to deliver
sustainable growth. Over the last five
years, we have been able to increase the
dividends we pay to investors by almost
40%.
Partners
As a Group we enjoy close relationships
with a range of trusted strategic partners
across the UK, USA and Europe.
Communities
Across the Group we believe in supporting
charitable initiatives and the communities in
which we operate.
Environment
We believe in ethical business practices
including taking steps to minimise our
environmental impact.
823
Training days
delivered in the
year
17,000
Number of
direct
UK Agriculture
customers
4.75p
Dividend per
share
7
Number of joint
venture and
associate
businesses
£81k
Charitable
donations in the
year
43%
Reduction in
CO2 emissions
over the last
three years
Carr's Group plc Annual Report and Accounts 2020
11
Strategic Report
Our Strategy
Strategic Objectives
Build business value by
focusing on markets
with growth potential
Grow and diversify
our international
footprint
Differentiate ourselves
Lead in our
through innovation
and technology
chosen markets
2020 achievements
During the year, our Agriculture division enhanced its strong position
in global supplementation, through the development and launch
of new product ranges which increase animal performance and
add value to our farming customers. Sales volumes across our
Supplements business increased 1.2% in the year despite market
challenges which places the division well for future growth.
In early FY20, we completed the integration of NW Total into our
broader Engineering division. NW Total has brought significant
opportunity to the Group, particularly in nuclear defence markets
where the business continues to further strengthen its order book.
We also continue to develop innovative solutions for the nuclear
decommissioning sector which represents a considerable long-term
opportunity for the Group.
Future priorities
Our Supplements business has seen international growth
in the year, particularly into Canada where we have made
progress through local distribution channels and in New
Zealand where year-on-year feed block sales have
increased by 40%. Our German joint venture business has
also seen increased exports across Europe including into
Russia, Spain, Italy and Turkey.
We continue to see significant international sales for
our Engineering business including increased revenues
generated from the USA, and the opening of showrooms
in the USA and Japan for our Global Robotics business. Our
Global Technical Services business continues to develop
its strong order book, particularly following its success
in securing a $6m MSIP® contract to be delivered into
Switzerland.
Agriculture
In Agriculture, we will continue to grow sales volumes across our
Supplements business in the UK, Irish, European and New Zealand
dairy sectors, and to enhance our market share across beef
sectors in the USA and Canada. We will also look to build upon our
presence in related sectors including equine in the UK and USA and
poultry across Europe.
Agriculture
We will continue to develop our international presence in
Agriculture across Europe, the USA, Canada, and Australasia
through strategic partnerships and enhanced business
development initiatives focusing on building relationships
and maintaining excellent levels of customer service.
Engineering
Our Engineering division continues to concentrate on global nuclear
markets, with a particular focus by our Global Robotics business on
opportunities in the USA, Europe and Japan. The 2019 acquisition of
NW Total has provided us with a strong foothold into the UK nuclear
defence market where significant opportunities exist.
Engineering
In Engineering we will continue to focus on global
opportunities, particularly across the USA, Europe and Asia.
Our divisional structure aligns the products and services we
offer with customers in our chosen markets and enhances
our international offering.
12
Carr's Group plc Annual Report and Accounts 2020
Following research trials undertaken with Kansas State
Our innovative approach to staying open safely and using
University, our US Supplements business launched FesCool®
technology during the COVID-19 pandemic enabled
in 2020, which enhances the performance of grazing cattle
our UK Agriculture business to maintain leading levels
(see page 23). Our German joint venture Supplements
of service, ensuring that our farming customers could
business also launched its Pick Block product this year, which
keep producing. In the USA we have invested this year
promotes improved animal welfare and poultry performance.
in production systems, driving business efficiencies and
We also made progress in automating bolus manufacture
ensuring that we continue to produce the best products.
at Animax, which will help drive future efficiencies and even
higher product quality.
During 2020, we invested in new manufacturing
technologies across our UK Manufacturing businesses,
In the year, our Engineering division developed a new client
adding additional machining capabilities and ensuring that
relationship management system which aligns our businesses
our processes remain state-of-the-art.
with customers and markets and enables improved business
development globally.
Product development
Service levels
Key to the Group’s future is our ongoing investment in the
development of intellectual property and product ranges,
We will continue to invest in our people and in the
delivery of our offering. Our collaborative approach and
which is achieved through our culture of collaboration and the
organisational culture will ensure that we continue to offer
sharing of know-how across each of our divisions.
leading levels of service to our customer base globally.
Acquisitions
Adding value
We also remain alert to suitable acquisition opportunities,
We also strive to ensure that our manufacturing processes
where businesses can be integrated within the Group to
are optimised and efficient, enabling us to add the most
achieve synergies and enhance the range of products and
value to our customers.
solutions offered to our global customer base.
Strategic Objectives
Build business value by
focusing on markets
with growth potential
Grow and diversify
our international
footprint
Differentiate ourselves
through innovation
and technology
Lead in our
chosen markets
Strategic Report
Governance
Financial Statements
2020 achievements
During the year, our Agriculture division enhanced its strong position
Our Supplements business has seen international growth
in global supplementation, through the development and launch
in the year, particularly into Canada where we have made
of new product ranges which increase animal performance and
progress through local distribution channels and in New
add value to our farming customers. Sales volumes across our
Zealand where year-on-year feed block sales have
Supplements business increased 1.2% in the year despite market
increased by 40%. Our German joint venture business has
challenges which places the division well for future growth.
also seen increased exports across Europe including into
In early FY20, we completed the integration of NW Total into our
Russia, Spain, Italy and Turkey.
broader Engineering division. NW Total has brought significant
We continue to see significant international sales for
opportunity to the Group, particularly in nuclear defence markets
our Engineering business including increased revenues
where the business continues to further strengthen its order book.
generated from the USA, and the opening of showrooms
We also continue to develop innovative solutions for the nuclear
in the USA and Japan for our Global Robotics business. Our
decommissioning sector which represents a considerable long-term
Global Technical Services business continues to develop
its strong order book, particularly following its success
in securing a $6m MSIP® contract to be delivered into
Switzerland.
opportunity for the Group.
Future priorities
Agriculture
Agriculture
In Agriculture, we will continue to grow sales volumes across our
We will continue to develop our international presence in
Supplements business in the UK, Irish, European and New Zealand
Agriculture across Europe, the USA, Canada, and Australasia
dairy sectors, and to enhance our market share across beef
through strategic partnerships and enhanced business
sectors in the USA and Canada. We will also look to build upon our
development initiatives focusing on building relationships
presence in related sectors including equine in the UK and USA and
and maintaining excellent levels of customer service.
poultry across Europe.
Engineering
Engineering
Our Engineering division continues to concentrate on global nuclear
In Engineering we will continue to focus on global
markets, with a particular focus by our Global Robotics business on
opportunities, particularly across the USA, Europe and Asia.
opportunities in the USA, Europe and Japan. The 2019 acquisition of
Our divisional structure aligns the products and services we
NW Total has provided us with a strong foothold into the UK nuclear
offer with customers in our chosen markets and enhances
defence market where significant opportunities exist.
our international offering.
Following research trials undertaken with Kansas State
University, our US Supplements business launched FesCool®
in 2020, which enhances the performance of grazing cattle
(see page 23). Our German joint venture Supplements
business also launched its Pick Block product this year, which
promotes improved animal welfare and poultry performance.
We also made progress in automating bolus manufacture
at Animax, which will help drive future efficiencies and even
higher product quality.
In the year, our Engineering division developed a new client
relationship management system which aligns our businesses
with customers and markets and enables improved business
development globally.
Our innovative approach to staying open safely and using
technology during the COVID-19 pandemic enabled
our UK Agriculture business to maintain leading levels
of service, ensuring that our farming customers could
keep producing. In the USA we have invested this year
in production systems, driving business efficiencies and
ensuring that we continue to produce the best products.
During 2020, we invested in new manufacturing
technologies across our UK Manufacturing businesses,
adding additional machining capabilities and ensuring that
our processes remain state-of-the-art.
Product development
Key to the Group’s future is our ongoing investment in the
development of intellectual property and product ranges,
which is achieved through our culture of collaboration and the
sharing of know-how across each of our divisions.
Service levels
We will continue to invest in our people and in the
delivery of our offering. Our collaborative approach and
organisational culture will ensure that we continue to offer
leading levels of service to our customer base globally.
Acquisitions
We also remain alert to suitable acquisition opportunities,
where businesses can be integrated within the Group to
achieve synergies and enhance the range of products and
solutions offered to our global customer base.
Adding value
We also strive to ensure that our manufacturing processes
are optimised and efficient, enabling us to add the most
value to our customers.
Carr's Group plc Annual Report and Accounts 2020
13
Strategic Report
Chief Executive’s Review
Despite challenging trading conditions
early in the year together with the onset
of COVID-19, a robust performance in
the second half resulted in a full year
performance which exceeded the
Board’s revised expectations.
Tim Davies
Chief Executive Officer
14
Carr's Group plc Annual Report and Accounts 2020
IntroductionAs outlined in our trading update on 12 March 2020, trading conditions across both divisions during the first half of the year were challenging and, unrelated to COVID-19, led to a reduction in the Board’s performance expectations for the full year. I am pleased to report, however, that despite these challenges, and the significant measures adopted across the Group in order to manage the effects of the pandemic, a very robust performance in the second half resulted in a full year performance which exceeded those revised expectations.While cash preservation has remained a key priority, we have been able to continue to invest in key areas to ensure that the Group remains well placed for the future. During the year, we strengthened our presence in growth markets across the world, whilst driving innovation and technological advances to maintain our strong position in our established markets. AgricultureAs previously reported, trading in our Agriculture division in the first half was slower than the prior year, largely driven by atypical weather patterns and growing conditions from the previous summer which reduced demand for key products. Improved trading during the second half, however, resulted in a robust outturn for the full year. During the year, revenue was down 4.1% to £342.6m (2019: £357.4m). Adjusted operating profit was down 8.5% to £13.4m (2019: £14.7m), whilst reported operating profit was down 4.8% to £13.4m (2019: £14.1m). Strategic Report
Governance
Financial Statements
Internationally, our Supplements business
continues to enhance its presence
in territories with significant growth
opportunity, particularly across Europe,
the USA, Canada, and New Zealand. We
also remain focused upon increasing our
presence in new markets including the
UK dairy sector. We continue to build
growth through strategic partnerships and
sustained research and development, and
remain confident in the division’s medium
term outlook.
Engineering
The Group remains confident in the
medium-term prospects of the Engineering
division.
Whilst parts of the division which serve
oil and gas markets have been impacted
in the short-term, owing to a reduction
in customer investment attributable to
the low oil price, there remain significant
opportunities across nuclear and defence
markets. The division also continues to
develop technologies, in conjunction with
its strategic partners, to provide innovative
solutions to customer challenges in nuclear
markets.
Our improved divisional structure provides
a comprehensive offering, able to compete
on a larger scale than before. Such changes
provide an uplift in the volume of contracts
we can tender for and leave the division
well placed for future growth.
Tim Davies
Chief Executive Officer
23 November 2020
Keeping farmers farming
during COVID-19
Throughout the pandemic our UK
Agriculture business has stepped up to
keep farmers farming.
We’ve stayed safe, but we’ve stayed
open. We’ve gone the extra mile,
keeping up our deliveries of feeds,
fuels and essential supplies to our
customers across rural communities.
And, most importantly, we’ve kept in
touch, particularly with those who are
vulnerable or self-isolating.
Our people have worked around the
clock, turning our network of Country
Stores into collection and distribution
centres for our core ranges of
agricultural products. We implemented
an order-and-collect policy, alongside a
rigorous health and safety regime, at all
times following government guidelines
and social distancing rules.
We are very proud of our colleagues,
who keep working hard and staying safe
to ensure that farmers can continue to
play their vital part in feeding the nation.
www.carrs-billington.com
Carr's Group plc Annual Report and Accounts 2020
15
EngineeringThe Engineering division performed resiliently despite significant challenges. First half trading was slow due to contract phasing and delays in receiving key robotics orders. This did not improve in the second half, as had been expected, mainly due to temporary disruption to nuclear and defence projects due to COVID-19 restrictions, which affected travel and access to customer sites. In addition, the sharp decline in the oil price led to customers deferring investments in the oil and gas sector. Whilst delays to projects had a negative impact on divisional performance, the business was able to strengthen its customer relationships by working flexibly to accommodate changing needs. During the year, revenue was up 14.0% to £53.0m (2019: £46.5m). NW Total, acquired towards the end of the prior year, contributed £11.7m (2019: £1.9m). Adjusted operating profit was down 35.6% to £3.8m (2019: £5.9m) and reported operating profit was down 77.2% to £1.4m (2019: £6.0m).OutlookAgricultureThe Group continues to remain confident in the medium-term prospects of the Agriculture division. Whilst short-term uncertainty relating to Brexit continues, our resilient performance in UK Agriculture during the pandemic illustrates the strength of our business and its ability to overcome future challenges. That adaptability, combined with operational efficiencies and enhanced customer focus, places the business well for future growth. Since the year-end, we have also significantly expanded the geographic coverage of our machinery franchise across southern Scotland with a more focused product range, which provides an opportunity to grow sales over the medium term. Strategic Report
Key Performance Indicators
Our performance
Our strategy is to be
recognised as an
international business at
the forefront of innovation
and technology in our
chosen markets.
In addition to the financial
highlights shown on page 3,
we monitor our growth and
health as a business, and
our performance against
strategy, using the key
performance indicators
noted opposite.
16
Carr's Group plc Annual Report and Accounts 2020
s
I
P
K
Underlying sales
growth/decline
i
l
a
c
n
a
n
F
i
-4.5%
2019: -1.8%
Free cash flow
Revenues are indicative of business activity but
are not in isolation an indicator of performance.
Our volume driven businesses are subject to
raw material price variations which are largely
passed through in selling prices, affecting
revenues. The reduction in the current year
is reflective of reduced commodity prices,
especially the oil price, together with lower
levels of activity in Engineering.
2020
2019
2018
-4.5%
-1.8%
13.6%
Free cash flow demonstrates how much
cash is available for the Group to utilise
for expansionary capital investment,
paying dividends, or financing/repaying
borrowings. The increase year-on-year
largely reflects improvements in the
management of our working capital, but is
also assisted by lower commodity prices.
£12.7m
2019: £8.9m
2020
2019
2018
£12.7m
£8.9m
£9.5m
s
I
P
K
i
l
a
c
n
a
n
i
f
-
n
o
N
Number of training
days delivered
823
2019: 722
We are committed to providing a variety of
development opportunities for our people.
In the year, the amount of face-to-face
training delivered across the Group was
impacted by the COVID-19 pandemic, but
employee engagement in our development
programmes has remained strong through
the use of online training.
2020
2019
823
722
Strategic Report
Governance
Financial Statements
Gross margin
Gross margin is a reflection of how
successfully we manage raw material
price volatility and our selling prices in
competitive markets. Our gross margin
fell to 13.2% in the year, largely reflecting
conditions across agriculture in the UK.
Adjusted Group
operating margin
Our underlying operating margin is
reflective of the gross margin, but also
indicates the efficiency of our operations.
The reduction in the year reflects the fixed
nature of some of our costs combined with
reduced levels of activity.
13.2%
2019: 13.4%
2020
2019
2018
13.2%
13.4%
13.2%
4.1%
2019: 4.7%
2020
2019
2018
4.1%
4.7%
4.1%
Return on
net assets
The Group’s overall return on net assets fell
to 11.1% this year. This reduction is reflective
of the underlying performance of the Group
as described elsewhere.
Ratio of net debt
to EBITDA
This measures the Group’s leverage and
reflects its ability to service its debt. The
reduction in the year is due to the cash
preservation measures implemented in
response to the COVID-19 pandemic.
11.1%
2019: 13.8%
2020
2019
2018
11.1%
13.8%
13.7%
0.91
2019: 0.99*
2020
2019
2018
0.91
0.99*
0.82*
Injury incident
frequency rate
We ensure that information relating to
all injuries and potential incidents, no
matter how serious, is properly captured
and reported to enable us to continually
improve the health and safety of our people
whilst at work.
*Not adjusted to reflect IFRS 16
CO2 intensity metric
We carefully monitor our carbon emissions
and have achieved a reduction of 43% in the
last three years. During the year these were
similar to the previous year overall, although
increased delivery activities during the
pandemic did increase our consumption
of fuels.
576
2019: 522
2020
2019
576
522
29.4
2019: 29.2
2020
2019
2018
29.4
29.2
46.6
Average rate of injuries/headcount x 100,000
Tonnes CO2/£m turnover
Carr's Group plc Annual Report and Accounts 2020
17
Strategic Report
Financial Review
Current and future development and performance
The key features of the year have been challenging markets in the UK and USA
for our Agriculture businesses and difficulties associated with COVID-19, particularly
in Engineering.
Revenue
Reported revenues from continuing
operations were £395.6m, 2.0% behind last
year (2019: £403.9m).
Alternative performance measures
This Financial Review and other parts of the
Strategic Report include both statutory and
alternative performance measures (APMs).
The principal APMs measure profitability
excluding items regarded by the Directors
as adjusting items (note 5). These APMs,
generally referred to as ‘adjusted’
measures, are used in the management
and measurement of business
performance on a day-to-day basis and are
also used in assessing performance under
the Group’s incentive plans. A glossary and
reconciliation of APMs is included towards
the end of the report and accounts on
pages 143 to 144.
Operating profit
Adjusted Group operating profit of
£16.2m is down 14.2% on last year (2019:
£18.9m). As a percentage of revenues,
the Group’s adjusted operating margin is
4.1% compared to 4.7% in 2019. Reported
operating profit was £13.8m (2019: £17.2m).
Our trading performance is covered in
detail in the Chief Executive’s Review on
pages 14 to 15 and in the Divisional Reviews
on pages 20 to 23 and 24 to 27.
Adjusted operating profits per division and
as a percentage of divisional revenues are
as follows:
3.9%Agriculture adjusted operating margin
7.2%Engineering adjusted operating margin
Neil Austin
Chief Financial Officer
18
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Adjusted* Operating Profit 2020
Adjusted Operating Profit
Agriculture
Engineering
Central
Total
2020
£’000
13,400
3,810
(963)
16,247
2020
%
3.9
7.2
2019
£’000
14,651
5,917
(1,638)
18,930
2019
%
4.1
12.7
*Segmental reported profit figures can be found in note 2 to the financial statements.
The Group’s share of the adjusted post-tax result in its associate
and joint ventures was £2.6m (2019: £2.7m).
Adjusting items
The Group incurred £2.4m (2019: £1.7m) in respect of adjusting
items in the year. This year’s charge included amortisation of
acquired intangibles of £1.4m, restructuring and impairment
charges of £1.9m, offset by a credit of £0.9m in relation to
contingent consideration on historic acquisitions (further details are
set out in note 5).
Finance costs
Net finance costs of £1.3m were 51.6% higher than in the previous
year, principally related to the increased interest payable on leases
following adoption of IFRS 16. Interest cover was 10.3 times based
on reported profit (12.1 times on an adjusted profit basis) compared
to 19.4 times in 2019.
Profit before tax
Adjusted profit before tax at £14.9m was 17.4% lower than in the
previous year (2019: £18.0m). Reported profit before taxation was
£12.5m (2019: £16.3m).
Taxation
The Group’s effective tax charge on profit from activities after net
finance costs and excluding results from the associate and joint
ventures, which are recorded after tax, was 16.0% (2019: 19.3%). A
reconciliation of the actual total tax charge to the standard rate of
corporation tax in the UK of 19% is given in note 8 to the financial
statements. The year benefitted from R&D related tax credits in
the USA.
Cash flow and net debt
a free cash flow of £12.7m was generated in the year, representing
an increase of 42.1% on £8.9m in the previous year. This was driven
by improved cash flow from operating activities, which increased
from £12.6m to £18.1m.
Headroom against existing facilities was £35.1m at the year end.
The Group’s main banking facilities were renewed in November
2018 for a five-year period together with its invoice discounting
facility which was renewed for a three-year period in August 2020.
Cash flow and net debt
Cash flow from operating activities
Net debt (excluding leases)
2020
£m
18.1
18.9
2019
£m
12.6
20.9
IFRS 16 ‘Leases’
The Group has adopted IFRS 16 ‘Leases’ during the year,
recognising £11.5m of right-of-use assets previously treated as
operating leases together with £4.4m of existing assets held under
finance lease arrangements. Incremental lease liabilities of £12.7m
have also been recognised at the transition date of 1 September
2019. The impact on the income statement was modest, with a
reduction in lease costs of £2.1m being offset by depreciation of
£1.8m and interest of £0.4m to leave a net charge of £0.1m to profit
before tax. Further details of the impact of IFRS 16 are given in the
Principal Accounting Policies and note 37.
Pensions
The Group operates its current pension arrangements on a
defined benefit and defined contribution basis. The defined
benefit scheme is closed to new members and closed to future
accrual. The scheme currently has 82 deferred members and 224
current pensioners.
The valuation on an IAS 19 accounting basis showed a surplus
before the related deferred tax liability in the scheme at 29
August 2020 of £8.0m (2019: £7.8m). This is after an actuarial gain
of £0.1m (2019: loss of £1.8m) which has been recognised in the
Consolidated Statement of Comprehensive Income.
Earnings per share
The profit attributable to the equity holders of the Company
amounted to £9.5m (2019: £12.0m), and basic earnings per share
was 10.3p (2019: 13.1p), a decrease of 21.4%.
Neil Austin
Chief Financial Officer
23 November 2020
Adjusted earnings per share of 11.9p (2019: 14.6p) is calculated by
dividing the adjusted profit attributable to equity holders for the
year by the weighted average number of shares in issue during
the year. The decrease of 18.5% reflects the reduction in trading
performance partly offset by the lower effective tax rate in 2020.
Carr's Group plc Annual Report and Accounts 2020
19
Strategic Report
Divisional Review: Overview
Agriculture
The Group’s Agriculture division
manufactures and supplies feed
blocks and supplementation
products for livestock, distributes
animal feeds and farm
machinery, and runs a UK
network of rural stores, providing
a one-stop shop for the farming
community.
Our Agriculture division
comprises of two
primary sub-divisions:
UK Agriculture
We have a significant presence of country stores
across northern England and southern Scotland
from which we serve the needs of our core farming
customer base providing a range of retail and animal
health products.
Our UK Agriculture business also supplies a broad
range of compound and blended feeds for livestock
under a number of well-respected brands.
From a number of our retail sites we specialise in
the supply of farming machinery in the UK including
all-terrain vehicles, tractors and combine harvesters
which we distribute from seven sites.
The business also supplies fuels across the region
from eight depots.
£280.7m
Revenues in 2020
Agriculture
Our brands
Our geographic footprint
UK
Europe
USA
Canada
New Zealand
CRYSTALYX®
HORSLYX®
TRACESURE®
ALLSURE®
AMINOMAX®
SMARTLIC®
MEGALIC®
FLAXLIC®
FESCOOL®
FEED IN A DRUM®
CARR'S BILLINGTON
WORKWARE
HENDON®
SIMARGHU®
20
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Agriculture
key figures
£342.6m
Revenues
£13.4m
Adjusted Operating Profit
17,000
UK farming customers
734
Employees globally
Revenue split:
UK
89.4%
International 10.6%
Supplements
We manufacture and supply a broad range
of innovative animal nutritional supplements
under well-respected brands. These include
patent-protected feed blocks and boluses
which effectively release trace elements into
livestock consistently and over periods of up
to six months. These products help to maintain
animal health and improve performance.
Our feed blocks are manufactured at a variety
of wholly owned and joint venture facilities
located across the UK, Germany and the
USA. We manufacture boluses from a wholly
owned facility in the UK.
These products are supplied through a large
distribution network across the UK, Europe,
Middle East, New Zealand and North America.
£61.9m
Revenues in 2020
Carr's Group plc Annual Report and Accounts 2020
21
Strategic Report
Divisional Review: The Year in Review
Agriculture
Overview
As previously reported, trading in our
Agriculture division in the first half was
slower than the prior year, largely driven
by atypical weather patterns and growing
conditions from the previous summer
which reduced demand for key products.
Improved trading during the second half,
however, resulted in a robust outturn for
the full year.
During the year, revenue was down 4.1% to
£342.6m (2019: £357.4m). Adjusted operating
profit was down 8.5% to £13.4m (2019:
£14.7m), whilst reported operating profit
was down 4.8% to £13.4m (2019: £14.1m).
During the period, following the
appointment of a new Managing Director
in the UK Agriculture business, the
management team was strengthened
through a further four senior appointments
to help optimise efficiencies and drive
strategic growth, whilst maintaining an
absolute focus on serving our customers.
We also appointed a new Commercial
Director in our Supplements business.
Supplements
Total global feed block sales volumes were
up 1.2% year-on-year. Sales volumes were
slightly ahead of the Board’s expectations
as a direct result of increased demand and
growth in target markets during the second
half. Despite overall volume increases,
however, increases in raw material prices
were not wholly mitigated through selling
price increases which led to lower margins,
particularly in the UK.
UK feed block volumes were up
5.2% compared to the prior year. This
performance was driven by improved
livestock prices in the second half, which
increased farmers’ willingness to invest in
supplementation.
Following a weaker first half, US feed block
sales subsequently recovered towards
the end of the financial year, with volumes
up 0.5% in the period overall. Whilst cattle
prices were suppressed during the majority
of the period, prices recovered towards
the end.
During the year, we successfully launched
our new FesCool® feed block in the
USA following extensive research trials
undertaken in conjunction with Kansas
State University. FesCool® enhances
the performance of grazing cattle in
warm climates by reducing the impact of
fescue toxicity and enhances our range of
innovative supplements that add real value
to livestock farmers.
In 2020, we also invested in and
enhanced our production systems in the
USA, spending £2.1m in improving our
manufacturing facilities at two of our sites
and in the creation of a research facility.
This investment will help drive efficiencies
and provide us with the opportunity to
develop and test new product ranges,
ingredients, and manufacturing techniques.
We continue to make progress in
developing sales of feed blocks into
Canada. As North America moved into
stricter national travel restrictions, we
benefited from having a sales team on
£2.1mInvested in US manufacturing facilities
22
Carr's Group plc Annual Report and Accounts 2020
the ground locally. The Canadian market
represents a significant potential market
for sales into beef and equine sectors, and
can be supplied out of the Group’s existing
facility in Belle Fourche, South Dakota.
New Zealand feed block sales were up 40%
in the period where we continued to make
progress in raising customer awareness
and building relationships with further
distribution partners. The Group continues
to consider the New Zealand market as
offering strong potential for future growth.
In Germany, our joint venture business,
Crystalyx Products GmbH, saw a 4.1%
decrease in feed block sales compared to
the prior year. During the year, the business
launched its new Pick Block product,
manufactured out of its plant in Oldenburg,
Germany, and sales are expected to build.
Pick Block is designed to improve poultry
welfare standards through environmental
enrichment, encouraging birds to
demonstrate a wider range of natural
behaviours.
Animax, the Group’s manufacturer
of livestock bolus supplements, had
a challenging year owing to market
pressures coupled with milder weather
which reduced customer demand. During
the year, the business appointed a new
Commercial Director and increased focus
on international growth opportunities. The
Group continues to make progress on its
manufacturing automation project, which is
expected to help drive future efficiencies,
new product ranges and even higher
product quality.
UK Agriculture
Total volumes in our compound feed
business declined by 6.9% during the
year. This was largely driven by the warm
summer in 2019 and subsequent mild
winter which led to high stocks of good
forage and reduced farmer demand for
bought-in feeds during the first half. Such
reduction in demand gave rise to increased
competition which impacted margins
during the period. During the second half,
the initial closure of the food service sector
impacted farmer incomes; however, the
strong retail sales subsequently seen led to
a significant pick-up in demand for certain
meat and dairy products which largely
offset the effect of this.
The Group’s fuel distribution business saw
sales volumes increase 2.9% on the prior
year. This was driven by colder weather
during March 2020 and customers stocking
up on heating oil in the early stages of the
pandemic when commodity prices were
low, as well as increased demand from
farmers due to a busy spring period on
farms generally.
Machinery sales were particularly strong
in the year, up 19.2% overall and achieving
record sales of £45.5m. New machinery
sales were up 17% on the previous year.
The performance was driven by improved
farmer confidence and government loan
schemes supporting farming investments,
together with pent-up demand following
a period of subdued activity prior to
the original Brexit date. Growth in the
machinery business, which outperformed
the market significantly, is also attributable
to the development of our relationship with
a key supplier.
The Group’s retail outlets performed
resiliently, with like-for-like sales up 1.6%
and overall sales up 0.6% during the period.
During the pandemic, extensive measures
were taken to ensure that our network of
country stores could continue to service
our core farming customers, who remain
critical to the UK’s food supply chain.
These innovative measures included the
successful roll-out of a pre-order, collection
and delivery service across all branches.
During the year we also progressed our
rationalisation and efficiency programme in
UK Agriculture. Our ongoing review of retail
store effectiveness resulted in the closure
of four sites as we focus our offering at
strategic locations and enhancing our
delivery and collection models. During the
pandemic, the early stages of lockdown
gave us the ability to test new ways of
working, which has provided valuable
strategic insight for the future and helped
develop our strategy for managing a
second wave.
Strategic Report
Governance
Financial Statements
Tall fescue is a resilient source of forage
found across 40 million acres of grazed
pastures in the USA and consumed by
nearly 17 million beef cattle.
Whilst a highly cost-effective source of
nutrition, feeding on tall fescue comes
with a common issue: fescue toxicity.
®
l
o
o
C
s
e
F
Cattle consuming infected tall fescue are
susceptible to overheating caused by the
constriction of blood vessels. Numerous symptoms
are displayed, and cattle performance is affected.
During the year, and following thorough research and
trials undertaken in conjunction with Kansas State
University, our US Supplements business, Animal
Feed Supplement, Inc., launched FesCool®, a new
low moisture feed block which improves temperature
regulation in cattle through the increased dilation of
blood vessels.
In controlled university trials, animals supplemented
with FesCool® exhibited better core temperature
regulation and increased forage intake, resulting in
significantly improved performance.
FesCool® represents another significant
development in cattle supplementation and
enhances our range of innovative products which
bring value to our farming customers.
https://smartlic.com/products/fescool/
Carr's Group plc Annual Report and Accounts 2020
23
Strategic Report
Divisional Review: Overview
Engineering
The Group’s Engineering division
designs and manufactures
specialist precision components,
bespoke equipment, robotic goods
and remote handling equipment,
and provides technical services,
from five sites in the UK, one site in
Germany and two sites in the USA.
These specialised products and services
are supplied to customers globally including
government bodies and some of the world’s
largest companies and nuclear site operators.
Engineering
Our Engineering division comprises of three sub-divisions:
Our businesses
Our global markets
UK Service and Manufacturing
WÄLISCHMILLER ENGINEERING
NUVISION ENGINEERING
NW TOTAL
BENDALLS ENGINEERING
CHIRTON ENGINEERING
CARRSMSM
HINDSBENDALLS
We supply into highly
regulated markets
including:
– Nuclear decommissioning
– Nuclear power generation
– Defence
– Pharmaceuticals
– Oil and gas
24
Carr's Group plc Annual Report and Accounts 2020
We operate four facilities across the north of
England which design, manufacture and service
complex and bespoke equipment.
These facilities specialise in equipment to be
supplied into regulated markets including electro-
mechanical machinery, process equipment
packages, pressure vessels and special purpose
fabrications. We also supply a range of on-site
technical services through teams of highly qualified
personnel.
Our businesses pride themselves on their reputation
for quality and service excellence which has led
to the establishment of longstanding and trusted
customer relationships.
£29.4m
Revenues in 2020
Global Robotics
Our Global Robotics business
comprises one facility in the UK,
one in Germany and one in the USA.
These businesses collectively design,
manufacture and supply a broad
range of complex robotic and remote
handling equipment.
These highly innovative products are
delivered predominantly into nuclear
markets and are designed to withstand
radioactive and other challenging
environments.
Through sustained investment in
research and development we ensure
that our Global Robotics business
remains at the forefront of remote
handling technology and that our
products continue to provide innovative
solutions for our global customer base.
£14.8m
Revenues in 2020
Strategic Report
Governance
Financial Statements
Global Technical Services
From our two sites in the USA, we offer
a range of engineering applications and
technical services which provide innovative
solutions across global nuclear industries.
These services include our patent
protected Mechanical Stress
Improvement Process (MSIP®), Power
Fluidics™ technology and a range of
decontamination services which are
supplied to utilities, OEMs and government
contractors worldwide.
Our Global Technical Services business
focuses heavily on research and
development, and has been engaged
by governments to develop solutions to
complex problems affecting the nuclear
industry.
Engineering
key figures
£53.0m
Revenues
£3.8m
Adjusted operating profit
369
Employees globally
Revenues by
market:
£8.8m
Revenues in 2020
Nuclear
49%
Oil and Gas 21%
Defence
18%
Other
12%
Carr's Group plc Annual Report and Accounts 2020
25
Strategic Report
Divisional Review: The Year in Review
Engineering
Overview
The Engineering division performed
resiliently despite significant challenges.
First half trading was slow due to contract
phasing and delays in receiving key
robotics orders. This did not improve in
the second half, as had been expected,
mainly due to temporary disruption to
nuclear and defence projects due to
COVID-19 restrictions, which affected
travel and access to customer sites. In
addition, the sharp decline in the oil price
led to customers deferring investments
in the oil and gas sector. Whilst delays to
projects had a negative impact on divisional
performance, the business was able to
strengthen its customer relationships by
working flexibly to accommodate changing
needs.
During the year, revenue was up 14.0%
to £53.0m (2019: £46.5m). NW Total,
acquired towards the end of the prior year,
contributed £11.7m (2019: £1.9m). Adjusted
operating profit was down 35.6% to £3.8m
(2019: £5.9m) and reported operating profit
was down 77.2% to £1.4m (2019: £6.0m).
UK Service and Manufacturing
Our UK Service and Manufacturing
business delivered a solid performance
during the first half. The second half,
however, was heavily impacted by the
decline in the oil price and significantly
reduced investment in the oil and gas
sector, which led to delays on one major
project. In the year, total revenues were
£29.4m (2019: £23.0m), including NW Total
revenues of £11.7m (2019: £1.9m).
Global Robotics
The Group’s Global Robotics business
had a challenging year. This was driven
by a weaker order book, resulting from
contract phasing and delays to projects
in Japan, together with export restrictions
which continue to affect China. These
challenges were exacerbated by delays
and travel restrictions imposed as a result
of COVID-19. Revenues for the year totalled
£14.8m (2019: £16.5m).
NW Total had a strong performance in its
first full year as part of the Group. Whilst
COVID-19 restrictions were imposed
temporarily on one customer site, this had a
limited impact on the business overall and
the risk of further impact or delay to that
project is reduced by on-site controls now
in place. The order book for the business
remains very strong and we remain
very encouraged by the opportunities,
particularly in the defence sector, that NW
Total brings to the division.
During the year, the Group also invested
£1.3m in state-of-the-art machinery at
its site in Carlisle, bringing large-scale
machining capabilities and enhancing the
range of customer services available within
the division.
While the business experienced lower
levels of activity during the year, the order
book was strengthened significantly.
We also remain optimistic about
opportunities in Japan, where many of the
country’s nuclear facilities continue to be
decommissioned. In the year, we opened
a showroom for our products in Japan
which will help develop opportunities in the
region.
Our Global Robotics business continues
to develop its position in the USA. Good
progress continues to be made on the
significant $8.5m contract previously
announced, and during the year we opened
a robotics showroom at our facility in
Mooresville, North Carolina, which will help
demonstrate the efficacy of our products to
customers in North America.
£11.7m
Full year revenue contribution from NW Total
26
Carr's Group plc Annual Report and Accounts 2020
Global Technical Services
The Group’s Global Technical Services
business performed in line with
expectations, generating revenues of
£8.8m (2019: £7.0m).
The phasing of several long-term
Mechanical Stress Improvement Process
(MSIP®) projects enhanced performance
in the second half of the year, which will
continue throughout the current year.
During the period, the business was
awarded another $6m MSIP® contract to
be delivered through to 2022.
The development of our passive cooling
technology continues to progress,
following the award of funding from the
US Department of Energy in 2019. It is
anticipated that an application for a second
tranche of funding will be made during
2021. This technology has the potential to
be retrofitted on existing nuclear power
plants to improve safety.
Our Global Technical Services business,
NuVision Engineering, Inc., is the world
leader in the use of Power Fluidics™
systems for nuclear applications.
These waste management systems use changes
in air pressure to mobilise radioactive sludges,
slurries, and liquids with no moving parts coming
into contact with contaminated substances.
Since its first installation at Oak Ridge National
Laboratory in 1996, NuVision has completed
hundreds of Power Fluidics™ installations globally,
with more than 50 projects completed for the US
Department of Energy. To date, there have been
no reported instances of system failure, erosion or
mechanical or corrosion damage.
Power Fluidics™ is a key competence of our
Global Technical Services business and provides a
reliable and highly effective means of mixing,
sampling, and pumping of radioactive waste in a
manner which is safe and eliminates facility
downtime.
https://nuvisionengineering.com/
Strategic Report
Governance
Financial Statements
i
i
™
s
c
d
u
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F
r
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Carr's Group plc Annual Report and Accounts 2020
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Strategic Report
Risk Management
Our success as a Group depends upon our ability to identify and
maximise the opportunities generated by our businesses and the
markets in which we operate. In doing so, we continue to develop an
embedded approach to risk management which puts risk and
opportunity assessment at the heart of our strategy.
Our risk appetite and approach to
risk management
The Group adopts a risk profile aligned
to our vision to be recognised as a truly
international business at the forefront of
technology and innovation. Our available
capital and resources are applied to
underpin our strategy in accordance with
our business model.
The Board believes that in operating the
Group’s businesses it is critical to strike the
right balance between an appropriate and
comprehensive control environment and
encouraging entrepreneurial behaviours
required to seek out and develop the
business.
However well this is struck, the business
will always be subject to a number of
risks and uncertainties. Our approach to
risk management is designed to provide
reasonable assurance that our assets are
safeguarded. The risks facing the business
are assessed and, where possible,
mitigated and all relevant information is
disclosed and reported to the Board.
Organisation and process
The Board assumes overall responsibility
for the management of risk and for
reviewing the effectiveness of the Group’s
risk management and internal control
systems.
The Board has established a clear
organisational structure with well-defined
accountabilities for the principal risks the
Group faces in the short, medium, and
long term, across all divisions together
with emerging risks. This is overseen
by the Executive Directors, who have
an active responsibility for focusing on
those areas of risk. The Board reviews
these risks, including consideration of
environmental, social, and governance
matters. This review is undertaken
quarterly.
For each of our principal and emerging
risks we have a risk management
framework detailing our assessment of the
risk, the controls we have in place, who is
responsible for managing the risk, as well
as any further mitigating actions required.
Board’s assessment of compliance
with the risk management
framework
The Board carries out a robust assessment
of the principal risks quarterly together
with any emerging risks. This is
supported by an annual review of the risk
management system undertaken by the
Audit Committee. Details of the activities
of the Audit Committee in relation to this
can be found in the Audit Committee
Report on pages 49 to 52. Decisions that
could have a material impact on the Group
are reviewed as and when required at
Board meetings.
Principal risk factors
Our business is subject to a variety of
risks and uncertainties. On the following
pages we have identified the risks we
regard as most significant to our Group
and performance at this time. These
may change as the Group develops
over the year. We have commented
on mitigating actions that we believe
help us manage these risks. However,
we may not be successful in deploying
some or all of these mitigating actions.
If the circumstances in these risks occur
or are not successfully mitigated, our
cash flow, operating results, financial
position, business and reputation could be
materially adversely affected.
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Governance
Financial Statements
: Change in risk (increase/decrease/no change)
Description of the risk
What we are doing to manage the risk
▲ ▼
Risk
Brexit
▲
COVID-19
▲
IT and Cyber-
Security
The impending end to the transition period following the UK’s
exit from the European Union (EU) highlights a number of risks
for the Group.
Part of our customer base is inherently reliant on agricultural
subsidies from the EU, and therefore future government
policy and support for the agricultural sector will potentially
impact on our customers with a knock-on effect to our
Agriculture businesses. Our customers also rely on trade
flows into the EU for their produce, and any tariffs on exports
could impact demand for their products with a consequential
impact on demand for our products and services.
Similarly, for some areas of the business the Group imports
raw materials from within the EU. The imposition of tariffs or
other related cost increases, together with any issues relating
to availability of raw materials, could impact the cost base of
the Group or its ability to service customers.
Our business may be impacted through disruption caused by
COVID-19.
In Agriculture, our businesses were able to remain open
during 2020 and were not subject to restrictions or closures.
Their biggest risk is a loss of staff due to an outbreak at a
production facility, or a wider requirement to self-isolate, that
causes us to be unable to produce or deliver goods.
Within Engineering, the same risk applies. Additionally,
broader travel restrictions or customer-specific site
restrictions may impact our ability to deliver projects where
site-based engineering or installation is required.
At a Group level, any disruption to our businesses could have
an impact on cash flows.
The Group relies on information technology and key systems
to support the business. In common with other organisations,
the Group undertakes development of its IT systems and is
currently implementing a new Group-wide ERP system. The
Group remains susceptible to cyber-attacks with the risk
of financial loss and threat to the overall confidentiality and
availability of data in systems.
Acquisitions
The Group is acquisitive and is therefore exposed to the
possibility of acquiring a company based on inaccurate
information, unrealistic synergies and financial benefits, or an
inappropriate deal structure.
Failure to effectively integrate acquired businesses could also
undermine any expected synergies.
We continue to monitor developments post Brexit and
incorporate steps into our future business planning
where these might be required in order to mitigate any
potentially adverse consequences including any arising
through changes to agricultural subsidies and support or
the imposition of any tariffs.
The Group benefits from its operational and geographic
diversity and is not substantially dependent on the EU for
either raw materials or revenues.
We continue to monitor the impacts on our business
week by week. Rigorous procedures implemented at
all of our sites are overseen by the Group’s HSE and
Risk Manager.
All sites are operating in line with government restrictions
in respect of social distancing, PPE requirements, and
other measures. Additional hygiene protocols are in place
around all of our operations, and where required our self-
isolation requirements are more prudent than required by
governments.
Cash flows continue to be frequently monitored and
all businesses run a number of sensitised scenarios
demonstrating the impact of disruption. These are
consolidated for an overall Group picture.
The Group has a comprehensive suite of IT security
solutions in place, which are reviewed and tested by
specialist third parties where appropriate. These have
been further updated and improved during the course of
2019/20.
From a system development perspective, major
projects are subject to appropriate project governance
arrangements.
A thorough and careful due diligence process is
undertaken, utilising relevant skilled internal personnel,
as well as external expertise when required. Individual
business unit and Group resource is used to analyse
potential synergies and financial benefits. Consideration
is given to the composition and skills of the management
team of the acquired company and support and relevant
training is provided by Group personnel to ensure a
successful integration.
The deal structure and proposed financing arrangements
are determined on a case-by-case basis.
Post-acquisition reviews are also undertaken to identify
any areas for improvement in future transactions.
Carr's Group plc Annual Report and Accounts 2020
29
Strategic Report
Risk Management continued
▲ ▼
: Change in risk (increase/decrease/no change)
Risk
People
Strategic
partners
Customer
demand
Treasury
Description of the risk
What we are doing to manage the risk
The knowledge, experience and skills of our employees are
central to the success of the Group.
We must attract, integrate, and retain the talent required to
fulfil our strategic growth ambitions.
Inability to retain key knowledge and adequately plan for
succession could have a negative impact on the Group’s
performance.
The Group has a number of strategic partners, particularly
in the Agriculture division, who are involved either as joint
venture partners or significant minority shareholders. A
successful working relationship with these partners is
paramount to the success of those businesses.
Changes in customer demand, be that retail, commercial or
government customers, caused by economic factors could
result in a fall in demand for the Group’s product offering,
resulting in a significant loss in revenue.
The Group has remuneration policies designed to attract
and retain employees with the ability and experience to
execute the Group’s strategy.
Management development programmes are in place,
alongside detailed succession planning across the Group.
Succession plans for senior management and other
key roles are reviewed by the Nomination Committee
regularly.
The Group undertakes a range of employee engagement
initiatives with a view to maintaining positive workplace
cultures and good working environments.
Close working relationships are maintained with all the
Group’s strategic partners. This includes regular meetings,
both formally and informally, and close involvement in the
setting and monitoring of strategy for those businesses. In
addition, arrangements are appropriately documented in
contracts and legal agreements.
The Group operates in diverse worldwide markets, which
provide resilience for the Group against difficulties faced
by any one market or economy. The businesses are
managed flexibly to react to changing demands in their
own sector.
We are exposed to a variety of financial risks in relation to
treasury. The Group must ensure that it has an adequate
level of facilities to provide sufficient funding to operate its
businesses and to develop growth opportunities.
Changes to the value of currencies can fluctuate widely
and could have a significant impact on a division’s results.
Furthermore, because the Group has international businesses,
it is subject to exchange risks in the translation of the
underlying net assets and earnings of its foreign subsidiaries
and joint ventures.
The levels of facilities are regularly reviewed by the Chief
Financial Officer, and these are also regularly reported to
and discussed by the Board.
The Group operates a treasury policy of hedging all
significant transactional currency exposures.
For interest rate risk on floating rate debt, we maintain
a mix of fixed rate debt, primarily finance leases, and
floating rate debt. These levels are monitored and
assessed against forecast changes in interest rates and
forward guidance from interest rate setting authorities.
Business
continuity
The operation of manufacturing plants involves many risks
that could cause a temporary or permanent stoppage in
production and could have a material adverse effect on the
Group.
Managing
costs
Margins may be affected by fluctuations in raw material prices
due to factors such as harvest and weather conditions, crop
disease, crop yields, alternative crops, and by-product values.
In some cases, due to the basis for pricing in sales contracts,
or due to competitive markets, we may not be able to pass on
to customers the full amount of raw material price increases
or higher energy, freight or other operating costs.
The Group has Business Continuity arrangements in place
to enable continuity of supply, as quickly as practicable,
of product to customers in the event of a natural disaster
or major equipment or plant failure. A programme of
insurance is also in place to protect against the cost of
major business interruptions.
The Group has a number of strategies in place to manage
this risk. These include:
– strategic long-term relationships with suppliers;
– multiple-source suppliers for key ingredients;
– raw material and forward energy purchasing policies to
provide security of supply and cost; and
– close monitoring of contract execution to ensure
supply is within agreed terms.
Emerging risk
Description of the risk
What we are doing to manage the risk
Climate
change
▲
Operating in the Agriculture sector, climate change, raw
material sustainability and regulatory requirements can have
an impact on the performance of the Group. Such impact can
include the cost of raw materials and the sustainability of raw
material supplies, farming and manufacturing operations, and
customer demand for the Group’s products.
The Group is geographically and operationally diverse
and has a focus on international growth markets. The
Group carefully manages its procurement of raw
materials, utilising ethically managed and sustainable
sources, and invests in the development of products
which are tailored to different farming conditions and
which incorporate alternative ingredients to reduce
reliance on imported soya for feed products.
The Group’s business model and strategy are central to an understanding of its prospects, and details can be found on pages 10 to 13.
30
Carr's Group plc Annual Report and Accounts 2020
Viability Statement
Strategic Report
Governance
Financial Statements
The Group is very diverse both operationally and geographically. The Group set down a strategic plan two years ago, which is subject to
ongoing monitoring and development as described below.
The Group’s focus is particularly on developing the Supplements business, because of the opportunities for international expansion and
product development, and its nuclear engineering business because of the global expansion opportunities in the nuclear sector and
adjacent markets.
The Group’s prospects are assessed primarily through its strategic planning process. This process is led by the Chief Executive across all
aspects of the Group. The Board participates fully in the annual process through an annual strategy day, detailed strategic presentations
on all areas of the business by business leaders throughout the year, and an annual half-year strategic update. Part of the Board’s role is
to consider whether the plan continues to take appropriate account of the changing external environment.
The output of the strategic planning process is a set of Group strategic objectives and a number of strategic priorities for the forthcoming
financial year. The latest updates to the strategic plan were finalised in August 2020 following this year’s review. This considered the
Group’s current position and the development of the business as a whole over the next three years.
Given the nature of the business cycles in both Agriculture and Engineering, it was decided that a period of three years to 2 September 2023
was the most appropriate for the purpose of a viability assessment. The Group has prepared detailed financial forecasts for the 3 year
period to 2 September 2023, so that 2 years 10 months remains at the time of approval of this year’s Annual Report. The first year of the
financial forecasts form the Group’s operating budget and is subject to a re-forecast process at the half-year. The second and third years
are in a similar level of detail.
The Group’s principal risks are set out on pages 29 to 30. The purpose of the principal risks table is primarily to summarise those matters
that could prevent the Group from delivering on its strategy. A number of other aspects of the principal risks – because of their nature or
potential impact – could also threaten the Group’s ability to continue in business in its current form if they were to occur. Of the principal
risks identified, the following are the most important to the assessment of the viability of the Group:
1. Brexit;
2. COVID-19;
3. Managing costs;
4. Reliance on key customers;
5. Strategic partners; and
6. Customer demand.
It was determined that none of these individual risks would, in isolation, compromise the Group’s viability.
Although the strategic plan reflects the Directors’ best estimate of the future prospects of the business, they have also tested the
potential impact on the Group of a number of scenarios over and above those included in the plan by quantifying their financial impact
and overlaying this on the detailed financial forecasts in the plan. These scenarios represent ‘severe but plausible’ circumstances that the
Group could experience.
The scenarios tested included significant reductions in profitability and associated cashflows associated with the risks highlighted above,
with consumer demand affecting all business units, additional impacts on Agriculture business units from Brexit and a larger impact on
Engineering from disruption caused by COVID-19. The results of this stress testing showed that, due to the stability of the core business,
the Group would be able to withstand the impact of these scenarios occurring over the period of the financial forecasts by making
adjustments to its operating plans within the normal course of business.
The Group also considered a number of scenarios that would represent serious threats to its liquidity. None of these were considered to
be plausible. We have assumed that, should the need arise we would have both the ability to renew existing debt facilities which mature
over the three-year period and be able to raise new debt.
Based on their assessment of prospects and viability above, the Directors confirm that they have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities as they fall due over the three-year period ending 2 September 2023.
The Directors also considered it appropriate to prepare the financial statements on the going concern basis, as explained in the Basis of
accounting and Going concern paragraphs in the Principal Accounting Policies on page 85 of the accounts.
Carr's Group plc Annual Report and Accounts 2020
31
Strategic Report
Corporate Responsibility
Carr’s Group promotes a supportive culture of
engagement, transparency and fairness. We take great
pride in doing what we can to ensure the health, safety
and wellbeing of our people and that we adhere to
ethical and sustainable business practices.
People
People are fundamental to the delivery of
our strategy and the long-term success of
the Group. Continuing to identify talent and
develop our people remain key priorities
across all of our businesses.
We promote high levels of teamwork and
co-operation and consider these to be
major contributing factors in the Group’s
success. Our organisational culture is led
from the top-down and places great value
in the principles of trust, respect, and
integrity.
We remain committed to providing a
working environment that:
is consistent and fair;
•
is diverse and free from discrimination;
•
• encourages the development of skills;
and
• promotes employee engagement.
Employee engagement
We strive to ensure that employees across
the Group are kept informed about key
developments and business performance.
This is achieved through the issue of
briefing notes by Executive Directors and
senior management which are circulated
regularly. Management within the Group
is also kept informed on issues that
may affect employees which enables
effective, transparent communication and
consultation where appropriate.
Throughout 2020, we have been able to
utilise CarrsConnect, our employee intranet,
as an effective communication tool during
the COVID-19 pandemic. Information was
regularly posted on CarrsConnect including
blogs, video blogs, announcements,
and updates to ensure that our people
remained abreast of key developments.
We have also been able to use our IT
systems, in particular Office 365 and
Microsoft Teams, to facilitate working
from home, which has ensured business
continuity and enabled us to remain in touch.
Engagement survey 2020
as part of our increased focus on employee
engagement, in November 2020 the Group
launched its first Employee Engagement
Survey to all staff across the Group. The
survey sought confidential feedback on a
range of topics including job satisfaction
and wellbeing, organisational culture,
health and safety and diversity. We want
to better understand the views of our
people in order to help shape future Group
culture, policy and strategy. We recognise
that colleagues who have interesting and
fulfilling roles, work in safe and healthy
environments and feel valued will not only
be happier and healthier, but more likely to
drive better business performance.
The results of the survey will be reviewed
during late 2020 and reported to the
Board and to Group employees during
early 2021. Where appropriate, action
plans will be developed across the Group
taking into account feedback and progress
monitored by the Board regularly. It will be
our intention to repeat the survey in future
years to monitor developing employee
views, and to ensure that any actions have
been appropriate in addressing areas of
concern.
Sharesave
The Group operates a Sharesave scheme,
in which all UK-based employees
are entitled to participate. The Group
recognises that the scheme is a well-
established method of employee
engagement, facilitating ownership across
the Group.
Diversity and equal opportunities
The Group is committed to an active
equal opportunities policy promoting an
environment free from discrimination,
harassment and victimisation, where
everyone will receive equal treatment
regardless of gender, colour, ethnic or
national origin, disability, age, marital status,
sexual orientation or religion.
All decisions relating to employment
practices will be objective, free from bias
and based upon the needs of the business
and individual merit. The Group values
the benefits of a diverse workplace and
is responsive to the needs and views of
stakeholder groups.
We remain committed to maintaining open,
fair and non-discriminatory recruitment
and development processes across the
Group. We promote flexible working
where possible and seek to have full
engagement in order to support any
employee who becomes disabled during
their employment.
Year overview 2020
We continue to provide extensive
development opportunities for all
employees.
The Group is committed to continuing
development and now offers a broad
range of courses and seminars which are
delivered in-house. We continue to support
a range of individuals across the Group
working towards professional qualifications
or accreditation.
In line with the Group’s focus on continuous
health and safety improvements, we have
seen a significant increase in health and
safety training at all levels which we expect
to continue.
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Carr's Group plc Annual Report and Accounts 2020
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Governance
Financial Statements
“Engaging with our employees
throughout the pandemic”
COVID-19
Given the broad challenges presented by COVID-19, we took the decision
prior to lockdown in March to cancel all face-to-face training and to focus
on virtual training utilising Microsoft Teams. We found that training by
video conference was most effective when delivered in shorter sessions
to fewer delegates. We ensured that feedback was gathered after each
session, to help improve the employee experience, with feedback being
very positive overall.
“Even though the social element of meeting
face to face cannot be fully emulated remotely,
undertaking the training over Teams was just as
beneficial as a normal session in the office. The
session itself was just as informative, constructive
and enjoyable as expected.” Employee feedback
We were fortunate to have a relatively high number of employees
who were able to work from home throughout the lockdown period.
To help our people adapt to new ways of working, we developed and
posted a series of short training video blogs on CarrsConnect, which
covered topics including Working from Home, Motivation and Health and
Wellbeing, which were widely viewed.
Coronavirus job retention scheme
During the early period of the pandemic,
our UK businesses furloughed a number
of employees under the Coronavirus Job
Retention Scheme (CJRS) where people
could not attend work and were unable to
work from home or where the pandemic
caused a reduction in trade. At the highest
point, this affected 62 employees.
In July 2020, we commenced collective
consultation in our UK Service &
Manufacturing business to best secure its
future sustainability given the significant
reduction in oil and gas investment
attributable to the pandemic. Following
such consultation, and the acceptance
of 10 voluntary redundancies, a further
15 employees were made redundant.
These roles could not be sustained into
the longer term and so it was not
considered appropriate for the Group
to continue receiving support for those
employees under the CJRS.
E-Learning
In September 2019 the Group launched
its E-Learning platform which provides
all employees with unlimited access to
accredited health and safety and other
workplace training. Manual Handling has
been the most commonly completed
course to date with 75% of all activity
around Health, Safety and Wellbeing
and 25% of all activity on Business
Knowledge. We are currently working
with businesses across the Group to
develop a suite of core training modules
for all new employees to complete
as part of their induction, which will
further embed E-Learning and enhance
capabilities across the Group.
E-Learning
activity
■ Health, Safety and Wellbeing 75%
■ Business Knowledge 25%
Health & safety
The health and safety of people in
the workplace remains of paramount
imporance. The Board considers health and
safety performance as a priority item at
each meeting and regularly reviews targets
and improvements as part of the Group’s
health and safety strategy.
COVID-19 brought significant health
challenges during the second half of the
year. Prior to the imposition of lockdown,
the Group developed its plans for
managing the effects of the pandemic
including detailed business continuity plans
across both divisions.
As the pandemic has developed, our
business continuity plans have remained
under close and constant review. From
March onwards, a variety of measures were
introduced across our businesses including
social distancing and site access controls,
enhanced hygiene measures, shift-pattern
working, and working from home. We also
stopped all unnecessary business travel
and revised Group travel policies to mitigate
risks. All such measures were developed in
strict adherence to government guidelines
(in the UK and overseas as appropriate) and
were rigorously observed.
Carr's Group plc Annual Report and Accounts 2020
33
Strategic Report
Corporate Responsibility continued
Health and safety continued
Our staff health and safety training
programme continues, with E-Learning
continuing to provide a range of accredited
courses. All training courses that were
previously classroom-based, including
IOSH-accredited courses, have been
delivered remotely during the pandemic
via video conferencing.
In 2020, the Group also established an
occupational health programme for
employees in all UK locations.
The hazard profile of the businesses
remains similar to the prior year. All
Group businesses which are accredited
to internationally recognised standards,
such as OHSAS 18001, have succeeded
in retaining these during the year, and
are transitioning to the new international
standard ISO 45001.
Reported Incidents
Group
2019/2020
2018/2019
All injuries
RIDDOR
injuries
All injuries
average IFR*
RIDDOR
average IFR*
83
9
576
62
78
5
522
20
*IFR= incident frequency rates, measured as the
number of incidents/headcount x 100,000
Over the last 12 months, an increase in
incident frequency rates (IFRs) has been
seen with a 12 month all injuries average
from September 2019 to August 2020 of
576 (2019: 522), and a RIDDOR injuries IFR
of 62 (2019: 20).
With no significant change in risk profile,
and progress being made towards the
Group’s strategic health and safety targets,
we consider this increase to be reflective
of improved injury classification, days lost
calculations and incident reporting across
the Group as local reporting and data
management improves. These statistics will
continue to be monitored across the Group
and reported annually.
Two RIDDOR injuries were major injuries.
The highest number of lost time injury types
during the year were hand injuries. A hand
safety campaign was therefore launched
during the year to raise awareness of hand
injuries, which led to a slight decrease in hand
injury frequency in the second half.
A health, safety and environmental strategy
was launched at the end of the financial
year, introducing a plan, action, review
cycle for risk identification and control,
effective incident investigation, learning,
communication and consultation, and
monitoring and audit. Each business has
developed its own business specific plan
for achieving strategic objectives, with
progress being regularly reported to the
Board throughout the current year.
Environment
The Group remains committed to
protecting the environment and reducing
the impact of its businesses through
best practice. We have an Environmental
Committee which includes senior members
of management from across the Group and
which meets regularly to consider energy
consumption, waste and opportunities
including initiatives to make improvements.
In 2019, we adopted a new Group
Environmental Policy which increases the
accountability of subsidiary businesses
and their leadership teams for making
environmental improvements. As part of
that policy, our data collection processes
have been enhanced to ensure that,
as a Group, we capture information
accurately to help drive policy. Across the
Group, we monitor energy consumption,
transportation, carbon generation, water
utilisation and recycling. In the second
half of 2020, as resource turned to
management of the COVID-19 pandemic,
we maintained our data collection practices
whilst environmental initiatives were
paused temporarily.
Our energy-intensive UK feed block
manufacturing business in Cumbria
continues to benefit under a Climate
Change Discount Agreement having met its
carbon emission reduction targets during
the year.
Solar panels installed on the roofspace
at the Animax site in Suffolk led to the
generation of nearly 40% of the total
electricity demand for the site during the
year.
All UK Group locations purchase their
energy from Haven Power Limited which
sources 100% of its electricity supplies from
renewable resources.
Packaging
The impact of packaging on the
environment remains under focus.
We are exploring alternatives to plastic
through research being conducted in our
Agriculture business in the USA.
Streamlined Energy and
Carbon Reporting
Carbon Reduction Performance*
CO2 tonnes
2019/2020
2018/2019
Agriculture, UK
Agriculture,
overseas
Engineering, UK
Engineering,
overseas
Head Office
Group total
4,292
6,240
753
253
103
11,641
*Scope 1 and Scope 2 emissions
4,613
6,269
581
244
77
11,784
The Group did not generate any additional
gases other than carbon dioxide during
the year. Absolute energy use in the year
across the Group totalled 39.5m kWh.
The increase in emissions in Engineering,
UK is largely attributable to the first full year
inclusion of NW Total. Data for Head Office
has shown an increase due to the inclusion
of air and rail travel.
The total amount of carbon dioxide
generated across the Group for the year
was 11,641 tonnes, a slight decrease on
the prior year. The relative carbon footprint
of the Group therefore equates to 29.4
tonnes per £m turnover. By comparison,
the footprint for the previous year was
29.2 tonnes per £m turnover.
Social engagement
Carr’s takes an active role in supporting
the communities in which it operates. That
support takes a variety of forms including
charitable monetary donations, fundraising,
partnering initiatives and voluntary work.
Carr’s is now one year into its partnership
with Yorkshire Dales Millennium Trust as
part of a three-year initiative to create
a lasting legacy for agriculture in the
Yorkshire Dales and surrounding areas. The
programme provides support for people,
innovation and the environment to deliver
sustainable farm improvements. It also
creates new native broadleaf woodlands,
34
Carr's Group plc Annual Report and Accounts 2020
Maintaining planted trees with the Yorkshire Dales Millennium Trust
Decorated purple bales which raise funds for WellChild
Strategic Report
Governance
Financial Statements
During the pandemic, Carr’s Billington also
made donations of slow-moving stock to
Carlisle Key (a homeless shelter for young
people aged 16-25) and Oak Tree Animal
Charity.
As a Group, we actively encourage our
people to participate in charitable and
community initiatives. In the past 12 months,
employees of NW Total cycled 500 miles
around the Scottish coastal areas, raising
over £2,000 for St Mary’s Hospice in
Ulverston.
Anti bribery and corruption
Carr’s operates its businesses in a
culture of honesty and openness. The
Group takes a very firm stance against
unethical behaviours including bribery and
corruption which are prevented through
a robust framework of controls, including
standardised policies and transparent
practices, which every employee is made
aware of and which are subject to regular
review. The Group’s policies require
the regular declaration by all personnel
of gifts and hospitality and provide a
whilstleblowing line which is available to all
for the reporting of concerns.
Human rights
Carr’s is committed to the sustainable
development of its business and to
improvement in its management of socio-
ethical issues, including ensuring that its
business and its supply chain remain free
from modern slavery and human trafficking.
Whilst the risk of modern slavery and
human trafficking within the Group and
its supply chain is assessed as low, Carr’s
remains vigilant and is aware that the risk of
modern slavery appearing in supply chains
can increase, particularly as the Group
continues to grow. Carr’s will not deal with
any third parties where concerns arise and
will accordingly report such circumstances
to appropriate authorities.
The Group operates internal policies which
are supported by training on the issue of
modern slavery which both protect against
risks and promote awareness.
A whistleblowing line is also available for
the reporting of concerns. We also carry
out appropriate due diligence on supply
chains and engage with suppliers in relation
to their policies on tackling slavery and
human trafficking.
which are hugely valuable habitats for
wildlife and also provide areas of shelter for
farm animals and help with flood risks and
soil erosion.
For a fifth consecutive year, Carr’s Billington
is supporting WellChild, the national charity
for seriously ill children. The business
has so far donated over £30,000 through
fundraising and from the proceeds of
purple wrap and netting. In addition to
raising funds, Carr’s Billington also raises
awareness of this charity through its use of
a social media campaign which encourages
customers to share pictures of eye-
catching purple hay bale displays.
Carr’s remains committed to helping young
people in the local community. The Group
continues to support Carlisle Youth Zone
which provides a safe and fun environment
designed to support the social, recreational
and emotional development of young
people in the area. Also local to Carlisle,
Bendalls Engineering continue to sponsor
Dalston Under 15s football club, which it
has supported for the last five years.
At the beginning of 2020, Carr’s Billington
became corporate supporters of RSABI
(Royal Scottish Agricultural Benevolent
Institution), which provides support
to individuals and families across the
agricultural sector.
Non-Financial Information Statement
Reporting requirement
Group policies and standards
Additional information
Environmental matters
Environmental Policy
See page 34
Employees
Human rights
Employee Handbook, Health and Safety Policy
See pages 32-34
Employee Handbook, Modern Slavery Statement
and Policy
See page 35
Social matters
Charitable Donations Policy
Anti-corruption and anti-bribery
Anti-Bribery Policy
See pages 34-35
See page 35
Policy implementation and due
diligence
Employee Handbook, financial and other controls
and internal due diligence/integration processes
See our Strategic Report on pages 1-37
Description of principal risks and
impact on business activity
Description of the business model
-
-
Non-financial key performance
indicators
Environmental Policy, Health and Safety Policy,
Employee Handbook
See pages 28-30
See pages 10-11
See pages 16-17
Carr's Group plc Annual Report and Accounts 2020
35
Strategic Report
Stakeholder Engagement: Our Section 172 Responsibilities
Our stakeholders
People
Customers
Investors
Partners
Communities
At Carr’s Group we believe in fairness and acting
responsibly in everything we do, so that we can
continue to make a positive impact on our people,
partners, investors, customers and the communities
in which we operate. We recognise that proper
consideration of the interests and views of our
broader stakeholders produces better outcomes
and enhances the sustainability of our businesses.
We have a broad range of stakeholders with whom we engage to provide
information about developments across our businesses and to understand
stakeholder priorities and perspectives. We adopt a number of initiatives
which focus on ensuring that a regular dialogue is maintained with our
stakeholders, some of which are carried out directly by the Board whereas
others are built into day-to-day management across the Group. Consideration
is given by the Board to the impact on all of our stakeholders when reviewing
all major projects for approval.
On these pages, we identify our various stakeholders, explain how we
engage as a business, and describe the positive outcomes this brings. These
disclosures demonstrate how we have regard to the matters set out in section
172(1) of the Companies Act 2006.
Board decision-making and stakeholder considerations during the year
included the matters set out below:
Board succession
During the year, the Board oversaw the
appointment of Peter Page as Non-
Executive Chairman and Kristen Eshak
Weldon as a Non-Executive Director. The
Board also announced the retirement of
Tim Davies from the role of CEO, and the
subsequent appointment of Hugh Pelham
who will take over as CEO in January 2021.
These changes at Board level required full
consideration of the interests and impact
upon our colleagues, investors, strategic
partners and customers.
Cash management
As part of the Board’s strategy for
managing the uncertainties associated with
COVID-19, the decision was reached to
suspend non-essential capital expenditure
and defer the payment of an interim
dividend until the likely impact of the
pandemic became clearer. These decisions
were communicated upon release of
the interim results in April 2020 following
detailed consideration of the impact
that this might have on our investors, our
strategic partners, and the communities
in which we operate. As the impact on
the Group became clearer, the deferred
dividend was reinstated and declared in
July 2020.
For more information on specific activities during the
year, please see:
People
Health and safety
Communities
Board
Pages 32-33
Pages 33-34
Pages 34-35
Page 40
36
Carr's Group plc Annual Report and Accounts 2020
How we engage
Stakeholder interests
Outcomes
We use a variety of methods to ensure
We strive to ensure that our
Our people remain a primary consideration in everything
that our people remain engaged including
people remain an active part
we do. We have a strong commitment to the health, safety
regular internal announcements, video
of our businesses, can shape
and wellbeing of our employees and introduced rigorous
blogs and informal meetings with Directors.
the future of the Group, have
measures as part of our management of the COVID-19
In 2020, we introduced an Employee
opportunities to develop their
pandemic (see page 33). We also further enhanced the
Engagement Survey. For more information,
skills and experiences, and feel
range of training and development opportunities we offer
see page 32.
properly valued and rewarded for
during the year. In 2020, we launched our first Employee
the efforts and contributions they
Engagement survey which will be used to help improve
continue to make.
our employee experience and shape the future of the
Group. We have also increased our use of employee
communications through CarrsConnect to make sure that
our people remain informed about developments across
the Group.
Staying in touch with our customers and
Customers want to work with
Good open communication with customers has been
suppliers has never been more important.
businesses who can meet
crucial during the pandemic. Throughout 2020, we have
Our management teams maintain regular
demands and deliver on
engaged in constant dialogue with our customers to
and open dialogue with those we do
business with which helps build long
lasting and trusted relationships. Key
promises, who treat them fairly,
understand their developing needs, particularly on large-
and who can be trusted to put
scale projects being delivered in our Engineering division,
their interests first. Customers
to help reduce risks, plan for contingencies and offer
customer dialogue is reported to the Board
also expect us to manage our
support where appropriate.
to ensure that customer perspectives are
business in a sustainable manner.
properly understood as part of the Board’s
decision making process.
We maintain a regular calendar of
Our investors trust us to manage
In addition to our regular investor engagement, during the
announcements and events for investors.
their assets and execute the
year we liaised with key investors on matters such as Board
The Executive Directors frequently
Board’s strategy. In so doing,
succession and changes to our Directors’ Remuneration
communicate with institutional investors to
we must act ethically, in a
Policy. We have also communicated our strategy for
discuss strategy and broader markets. The
sustainable manner, and to
managing the ongoing COVID-19 pandemic, including
Chairman, Non-Executives and Company
exercise good governance
health and safety considerations across the Group, cash
Secretary also regularly engage with
practices. Our investors also
management and contingency planning.
investors on governance issues and other
expect us to remain open about
matters concerning the Board.
the Group’s current and expected
performance.
The Group includes a number of joint
ventures with strategic partners with
Our strategic partnerships are
Our joint venture boards and management teams have
founded upon mutual trust and
worked dynamically and collaboratively during 2020 to
whom we maintain an active dialogue.
strategic alignment. Our partners
ensure an aligned and risk-averse approach to COVID-19.
Regular formal and informal meetings
value long-term commitment,
Working together has enabled all of our joint venture
take place with our partners involving both
open communication and
businesses to continue trading effectively and helped
Board members and senior management
diligence so that we can
build strength and resilience into our business model, to
covering strategic, operational and industry
effectively pursue jointly
our mutual benefit.
issues, which are regularly reported to
developed strategic goals.
the Board to ensure that it remains fully
appraised.
We practice responsible behaviours
at all times and are committed to the
communities where we have an impact.
We encourage active participation in
community initiatives and continue to
Our various community
stakeholders have broad
interests ranging from the
The Group is committed to ethical and responsible
business practices and adheres to a policy framework
on matters such as modern slavery and the sustainable
provision of jobs and investment
sourcing of raw materials. We also ensure that
in local economies, to supporting
environmental considerations feature prominently on the
support a range of selected charitable
vulnerable people and
Board’s agenda. Across the Group, our people devote
causes. We are also party to raw material
environmental and charitable
considerable time and resources to good causes and
sustainability programmes. Reports
on significant community issues and
sustainability programmes are delivered to
the Board from time to time.
initiatives.
community initiatives including Carlisle Youth Zone,
WellChild and The Yorkshire Dales Millennium Trust. For
more information on our corporate social responsibility
programme, please see pages 34 to 35.
Our stakeholders
People
Customers
Investors
Partners
Communities
Strategic Report
Governance
Financial Statements
How we engage
Stakeholder interests
Outcomes
We use a variety of methods to ensure
that our people remain engaged including
regular internal announcements, video
blogs and informal meetings with Directors.
In 2020, we introduced an Employee
Engagement Survey. For more information,
see page 32.
We strive to ensure that our
people remain an active part
of our businesses, can shape
the future of the Group, have
opportunities to develop their
skills and experiences, and feel
properly valued and rewarded for
the efforts and contributions they
continue to make.
Staying in touch with our customers and
suppliers has never been more important.
Our management teams maintain regular
and open dialogue with those we do
business with which helps build long
lasting and trusted relationships. Key
customer dialogue is reported to the Board
to ensure that customer perspectives are
properly understood as part of the Board’s
decision making process.
We maintain a regular calendar of
announcements and events for investors.
The Executive Directors frequently
communicate with institutional investors to
discuss strategy and broader markets. The
Chairman, Non-Executives and Company
Secretary also regularly engage with
investors on governance issues and other
matters concerning the Board.
The Group includes a number of joint
ventures with strategic partners with
whom we maintain an active dialogue.
Regular formal and informal meetings
take place with our partners involving both
Board members and senior management
covering strategic, operational and industry
issues, which are regularly reported to
the Board to ensure that it remains fully
appraised.
We practice responsible behaviours
at all times and are committed to the
communities where we have an impact.
We encourage active participation in
community initiatives and continue to
support a range of selected charitable
causes. We are also party to raw material
sustainability programmes. Reports
on significant community issues and
sustainability programmes are delivered to
the Board from time to time.
Customers want to work with
businesses who can meet
demands and deliver on
promises, who treat them fairly,
and who can be trusted to put
their interests first. Customers
also expect us to manage our
business in a sustainable manner.
Our investors trust us to manage
their assets and execute the
Board’s strategy. In so doing,
we must act ethically, in a
sustainable manner, and to
exercise good governance
practices. Our investors also
expect us to remain open about
the Group’s current and expected
performance.
Our strategic partnerships are
founded upon mutual trust and
strategic alignment. Our partners
value long-term commitment,
open communication and
diligence so that we can
effectively pursue jointly
developed strategic goals.
Our various community
stakeholders have broad
interests ranging from the
provision of jobs and investment
in local economies, to supporting
vulnerable people and
environmental and charitable
initiatives.
Our people remain a primary consideration in everything
we do. We have a strong commitment to the health, safety
and wellbeing of our employees and introduced rigorous
measures as part of our management of the COVID-19
pandemic (see page 33). We also further enhanced the
range of training and development opportunities we offer
during the year. In 2020, we launched our first Employee
Engagement survey which will be used to help improve
our employee experience and shape the future of the
Group. We have also increased our use of employee
communications through CarrsConnect to make sure that
our people remain informed about developments across
the Group.
Good open communication with customers has been
crucial during the pandemic. Throughout 2020, we have
engaged in constant dialogue with our customers to
understand their developing needs, particularly on large-
scale projects being delivered in our Engineering division,
to help reduce risks, plan for contingencies and offer
support where appropriate.
In addition to our regular investor engagement, during the
year we liaised with key investors on matters such as Board
succession and changes to our Directors’ Remuneration
Policy. We have also communicated our strategy for
managing the ongoing COVID-19 pandemic, including
health and safety considerations across the Group, cash
management and contingency planning.
Our joint venture boards and management teams have
worked dynamically and collaboratively during 2020 to
ensure an aligned and risk-averse approach to COVID-19.
Working together has enabled all of our joint venture
businesses to continue trading effectively and helped
build strength and resilience into our business model, to
our mutual benefit.
The Group is committed to ethical and responsible
business practices and adheres to a policy framework
on matters such as modern slavery and the sustainable
sourcing of raw materials. We also ensure that
environmental considerations feature prominently on the
Board’s agenda. Across the Group, our people devote
considerable time and resources to good causes and
community initiatives including Carlisle Youth Zone,
WellChild and The Yorkshire Dales Millennium Trust. For
more information on our corporate social responsibility
programme, please see pages 34 to 35.
This Strategic Report was approved by the Board on
23 November 2020 and signed on its behalf by:
Tim Davies
Chief Executive Officer
Carr's Group plc Annual Report and Accounts 2020
37
Governance
The Board
N
R
—
Peter Page
Non-Executive Chairman
Peter joined Carr’s in November 2019 and became
Non-Executive Chairman in January 2020. Peter
was formerly Chief Executive of Devro plc,
one of the world’s leading manufacturers of
collagen casings for the food industry, a position
which he held for 11 years during which time
he transformed the company’s international
manufacturing capabilities. Prior to this, Peter
worked at poultry genetics and stock supplier
Aviagen.
Tim Davies
Chief Executive Officer
Tim joined Carr’s in March 2013 as Chief
Executive. Tim was formerly the Group Managing
Director at Openfield, the largest farmer-owned
grain marketing business in the UK. Prior to this,
he progressed from Sales Director to Managing
Director of Grainfarmers plc in 2005 and led the
company’s merger with Centaur Grain Ltd in 2008
to form Openfield. Tim will be standing down
as Chief Executive, and from the Board, at the
conclusion of the Company’s AGM in
January 2021.
N
R
A
N
R
A
John Worby
Senior Independent Director
John was appointed a Non-Executive Director in
April 2015. John is currently Senior Independent
Director and Chairman of the Audit Committee
of Hilton Food Group plc. He was previously
the Finance Director of Genus plc and a Non-
Executive Director of Cranswick plc and Fidessa
Group plc. John is a chartered accountant and a
member of the Financial Reporting Review Panel.
Ian Wood
Non-Executive Director
Ian was appointed to the Board in October
2015. He retired as the Commercial Director,
International Business Development for Centrica
(previously British Gas) in January 2016 having
held a number of positions with the Company,
covering various aspects of the business including
engineering, customer services, industrial and
commercial marketing, and energy trading within
the UK, Continental Europe and North America.
Ian is a Director of Talkin Energy Ltd and Chief
Executive of Cumbria County Holdings.
38
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
—
N
R
A
Neil Austin
Chief Financial Officer
Neil joined Carr’s in January 2013 and became
Chief Financial Officer in April 2013. Neil was
formerly a Director at PwC, having joined as a
graduate in their Newcastle office in 1997. He was
appointed as a Director of the Newcastle office
in 2007 with lead responsibility for part of the
Assurance practice working alongside FTSE 350
companies and multi-national organisations.
Alistair Wannop
Non-Executive Director
Employee Engagement Representative
Alistair was appointed a Non-Executive Director
in 2005. Alistair has been the Chairman of both
the County NFU and the MAFF northern regional
advisory panel. He has served as a Director of
The English Farming and Food Partnership, Rural
Regeneration Cumbria, and Cumbria Vision.
Alistair is a fellow of the Royal Agricultural Society
of England and between 2017 and 2018 held
office as High Sheriff of Cumbria.
N
R
A
—
Kristen Eshak Weldon
Non-Executive Director
Kristen was appointed as a Non-Executive
Director in October 2020. Kristen was until
recently a member of the Executive Group at
Louis Dreyfus Company, where she focused
on innovation and forward-looking investments
across global agriculture. As Head of Food
Innovation and Downstream Strategy, she led
investment activities in the ag-tech and food
technology industries. Prior to Louis Dreyfus,
Kristen spent 13 years at Blackstone, the leading
global investment business, where she was co-
head of the London office for the company’s
$75bn Hedge Fund Solutions business.
Matthew Ratcliffe
Company Secretary
Matthew joined Carr’s in November 2016 as
Company Secretary and Legal Counsel. Matthew
is a solicitor with a breadth of experience working
alongside both international and local businesses
in corporate, commercial and contentious
matters. He began his career with Pinsent Masons
before joining a Cumbrian law firm in 2009 and
being appointed a Director in 2014.
Committee membership
N
R
A
Nomination
Remuneration
Audit
Chair
—
None
Carr's Group plc Annual Report and Accounts 2020
39
Governance
Chairman’s Introduction
Peter Page
Chairman
On behalf of the Board,
I present the Group’s
Corporate Governance
Report for the financial
year ended 29 August
2020.
requirement that Executive Directors hold
up to 200% of their base salary in shares
which have vested under the Long-Term
Incentive Plan for a period of two years
after they leave their employment, to
ensure that interests remain aligned with
shareholders over the longer term. These
two changes are in line with current best
practice and follow consultation with major
shareholders. The new policy is set out in
the Remuneration Committee Report on
pages 54 to 60. We hope you will agree
that it is an appropriate framework for
rewarding performance and encouraging
entrepreneurialism in a manner which
aligns with the interests of our stakeholders.
Our forthcoming AGM will be different to
previous years. As COVID-19 restrictions
prevent the AGM from taking place in
person, members will be invited to vote on
each of the resolutions proposed by proxy
and given the opportunity to raise questions
in advance. We will also be broadcasting
a presentation online to report on the
Company’s performance, provide answers
to questions and to introduce Hugh Pelham.
In addition, we will publish responses to
the questions raised by members on the
Company’s website. Details will be provided
in the Notice of AGM.
Developing good governance is central to
the integrity, reputation and performance of
Carr’s Group. I am committed to achieving
the highest standards at all times.
Peter Page
Chairman
23 November 2020
The Group’s governance framework is
designed to safeguard its long-term
success for the benefit of all stakeholders.
It evolves as the Group develops and
promotes transparency, respect and
accountability. It ensures that the Board
operates in a culture of openness and uses
its collective experience to optimise its
effectiveness.
This report describes how we adopt the
principles of the UK Corporate Governance
Code 2018, which has applied to the Group
since 1 September 2019.
In January 2020 Chris Holmes stood
down from the Board after 29 years’
dedicated service to the Group firstly
as Chief Executive and subsequently
Chairman. I became Chairman at the
January 2020 AGM. In October 2020
Kristen Eshak Weldon joined the Board
as an independent Non-Executive
Director, bringing considerable
experience of investment appraisal and
extensive knowledge of new technology
opportunities in global agriculture. Hugh
Pelham will be joining the Board in January
2021, taking over as Chief Executive upon
Tim Davies standing down at the AGM after
seven years in the role.
In last year’s Annual Report, we explained
that the Board had formalised its
workforce engagement initiatives, with
Alistair Wannop being appointed as
Board Representative for Employment
Engagement. Due to COVID-19, planned
face-to-face engagement was replaced
by videoconference technology to keep
people informed and involved. Staying
connected with our people has never been
more important.
At the AGM in January 2021, our new
Executive Director Remuneration Policy will
be put to shareholders, as it will be three
years since the policy was last approved.
Key changes to the policy (compared to
that approved in January 2018) are: (a) the
alignment of employer pension contribution
rates for Executive Directors with those
available to the majority of the Group’s UK
workforce; and (b) the introduction of a new
40
Carr's Group plc Annual Report and Accounts 2020
Corporate Governance Report
Strategic Report
Governance
Financial Statements
Statement of Compliance with UK Corporate
Governance Code
The UK Corporate Governance Code dated July 2018 and issued by
the Financial Reporting Council sets out standards of good practice
in relation to issues such as:
• Board Leadership and Company Purpose;
• The division of Responsibilities;
• Board Composition, Succession and Evaluation;
• Audit, Risk and Internal Control; and
• Remuneration.
We are required to state how we have applied the principles
contained in the Code and explain any areas where compliance
has not been possible during the year.
The Board considers that the Company has, during the year ended
29 August 2020, complied with the requirements of the Code in
their entirety.
The Board
The Directors have a collective duty to promote the long-term
success of the Company for its shareholders. In determining
long-term strategy and objectives of the Group, the Board is
mindful of its duties and responsibilities to its shareholders as
well as employees and other stakeholders. The Board reviews the
performance of management and the Group’s businesses and
monitors the delivery of the Group’s strategic objectives.
The Board’s time can be grouped in to six key areas as outlined
below. A portion of its time is also spent on administrative matters.
Strategy
Risk
Governance
Setting strategic aims and objectives.
Setting organisational cultures and
behaviours.
Reviewing new business developments
and opportunities including potential
acquisitions.
Investing in research and technology.
Oversight of the Group’s risk management
and internal control framework.
Compliance with legal, regulatory and
disclosure requirements.
Consideration of feedback from external
and internal audit.
Determination of matters reserved for the
Board and terms of reference for Board
committees.
Board and Committee performance
evaluation.
Succession planning and Board
appointments.
Finance
Stakeholder engagement
Health, Safety and Environmental
Approving budgets.
Monitoring financial performance.
Engagement with employees,
shareholders and other stakeholders and
consideration of feedback.
Oversight of the preparation and
management of the financial statements.
Approval of public announcements.
Consideration of Health, Safety and
Environmental reports from management.
Providing support where appropriate to
drive continuous improvement.
Consideration of feedback from investor
meetings and roadshows.
Approving major capital projects or
materially significant contracts.
Determining dividend policy.
Determining pensions strategy.
Carr's Group plc Annual Report and Accounts 2020
41
Governance
Corporate Governance Report continued
The powers of the Directors are set out in the Company’s Articles
of Association. In addition the Directors have responsibilities and
duties under legislation, in particular those arising under s.172 of
the Companies Act 2006.
The Code stipulates that there should be a clear division of
responsibility between Board governance and executive
management.
During the year ended 29 August 2020, the Board comprised of
two Executive Directors, a Non-Executive Chairman1, and up to five
Non-Executive Directors2. There is also a Company Secretary to the
Board. Subsequent to the end of the financial year, Kristen Eshak
Weldon was appointed as a Non-Executive Director on 1 October
2020, and it was announced that Hugh Pelham would be appointed
to the Board as an Executive Director and Chief Executive
Designate with effect from 4 January 2021. Biographies of the
Board can be found on pages 38-39.
The Board met on 11 scheduled occasions throughout the year. In
addition to regular scheduled meetings, a number of additional
meetings took place during the year in order to deal with specific
business arising from time to time. Whilst the Board’s planned
agenda was for all scheduled meetings to take place in person,
the majority of Board and Committee meetings during 2020
were held by videoconference in order to minimise the risk of
COVID-19 transmission. Board agendas are set by the Chairman in
consultation with the Executive Directors and with the assistance
of the Company Secretary. All Directors are expected to attend
scheduled Board meetings and relevant Committee meetings in
addition to the Annual General Meeting unless they are prevented
from doing so by prior work or extenuating personal commitments.
Directors who are unable to attend a particular meeting receive
relevant briefing papers and are given the opportunity to discuss
any issues with the Chairman, the Chief Executive or the Chief
Financial Officer.
To enable the Directors of the Board to carry out their
responsibilities, all Directors have full and timely access to all
relevant information. The Board maintains a schedule of matters
reserved for the Board which is reviewed against best practice. A
summary of those matters is set out below and a full schedule is
available on the Company’s website.
The Board is responsible for:
• the Group’s strategy;
• acquisitions and divestment policy;
• corporate governance, risk management and environmental
policy;
• approval of budgets;
• general treasury policy;
• major capital expenditure projects;
• dividend policy; and
• monitoring the Group’s profit and cash flow performance.
The Board has delegated authority to the Audit, Remuneration, and
Nomination Committees to carry out certain tasks as defined in
their written terms of reference approved by the Board; these are
also available on the Company’s website.
The Chairman is responsible for:
• providing effective leadership of the Board;
• promoting ethical behaviours and high standards of corporate
governance;
• ensuring the effectiveness of the Board in determining and
developing strategy, and in fulfilling its responsibilities;
• setting the Board agenda;
• ensuring that members of the Board are well informed to
enable the Board to make sound and effective decisions and
ensure constructive discussion;
• ensuring effective communication with shareholders and other
•
stakeholders;
identifying and meeting (in conjunction with the Company
Secretary) the development needs of the Board and for each
Director; and
• providing strategic insight and a sounding board for the Chief
Executive on key business decisions, and challenging proposals
where appropriate.
The Chief Executive is responsible for:
• the executive management of the Group’s business, to deliver
the strategy and commercial objectives agreed by the Board;
• researching and proposing the Group’s strategy and commercial
objectives, which are developed in conjunction with the Chairman;
• effecting the decisions of the Board and its Committees;
• maintaining and protecting the reputations of the Group and its
subsidiaries;
• establishing an annual budget consistent with the agreed
strategy to be agreed by the Board;
• managing the performance of the Group against the agreed
budget;
• ensuring that dialogue is maintained with the Chairman on
important issues facing the Group;
• providing information and advice on succession planning to the
Board, and managing executive succession planning;
• providing information and advice to the Board on health, safety
and environmental issues and overseeing the Group’s strategy
on such matters;
• setting the Group’s culture, values and behaviours and
conducting the affairs of the Group adhering to the highest
standards of integrity and good governance.
Elections
The Company’s Articles of Association provide that one third of
the Directors retire by rotation each year at the Annual General
Meeting. In accordance with the Code, the Board consider it best
practice to require all Directors to retire and stand for re-election
annually.
1 Until conclusion of the AGM on 7 January 2019, Chris Holmes was Non-Executive Chairman. Following conclusion of that AGM, Peter Page became Non-Executive
Chairman.
2 From the appointment of Peter Page to the Board on 1 November 2019 until Chris Holmes standing down from the Board upon conclusion of the AGM on 7 January
2019, there were five Non-Executive Directors. For the remainder of the financial year, there were four Non-Executive Directors.
42
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Attendance and Agenda
In advance of all Board meetings the Directors are supplied
with detailed and comprehensive papers covering the Group’s
strategy, performance and operations. Members of the executive
management team or other third parties may also attend meetings,
or parts of meetings, where appropriate from time to time by
invitation. The Company Secretary is responsible to the Board for
the timeliness and quality of information.
Details of the scheduled meetings of the Board, and of the Audit,
Nomination and Remuneration Committees, during the period
together with members’ attendance are set out in the table below.
Scheduled Meeting Attendance
No. of meetings
Peter Page**
Chris Holmes***
Tim Davies
Neil Austin
Alistair Wannop
John Worby
Ian Wood
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
11
9
5
11
11
11
11
11
4
4*
1*
4*
4*
4
4
4
5
4
1*
2*
3*
5
5
5
6
5
1
6*
6*
6
6
6
* Attended meeting in full or part by invitation.
** Appointed on 1 November 2019 (attended 100% of meetings whilst appointed).
*** Stood down on 7 January 2020 (attended 100% of meetings whilst appointed).
Support
Directors can obtain independent professional advice at the
Company’s expense in performance of their duties as Directors.
None of the Directors obtained independent professional advice
in the period under review. All Directors have access to the
advice and the services of the Company Secretary. In addition to
these formal roles, the Non-Executive Directors have access to
senior management across the Group either by telephone or via
involvement at informal meetings.
Directors’ conflicts of interest
The Companies Act 2006 and the Company’s Articles of
Association require the Board to consider any potential conflicts
of interest. The Board has a policy and procedures for managing
and, where appropriate, authorising actual or potential conflicts of
interest. Under those procedures, Directors are required to declare
all directorships or other appointments to organisations that are
not part of the Group and which could result in actual or potential
conflicts of interest, as well as other situations which could result in
a potential conflict of interest.
The Board is required to review Directors’ actual or potential
conflicts of interest at least annually. Directors are required to
disclose proposed new appointments to the Chairman before
taking them on, to ensure that any potential conflicts of interest can
be identified and addressed appropriately. Any potential conflicts
of interest in relation to proposed Directors are considered by the
Board prior to their appointment. Any conflicts are also required to
be declared at the outset of every Board meeting in relation to the
matters on the agenda. In the financial year ended 29 August 2020,
there were no declared conflicts of interest.
Board evaluation
Each year the Board undertakes a review of its effectiveness. The
Board last undertook an independent external review in 2017, which
was conducted by Independent Audit Limited. That review, and the
report delivered to the Board, drew positive conclusions including
that the Board and its Committees were performing effectively
and appropriately constituted. The report went on to make certain
further recommendations including the planning of agendas to
include further business-specific reviews and increasing the focus
on succession planning and people issues more generally.
In each of the years ended 2018 and 2019, the Board carried out
internal reviews which built upon the 2017 external review. These
reviews were led by the Chairman with the support of the Company
Secretary. Reviews commenced with discussions between the
Chairman and the Company Secretary, together with a review of
the findings of prior reviews and of progress made during the year
against recommendations for improvements. The discussions led
to the issue of questionnaires to members of the Board. Responses
were collated by the Company Secretary and reports presented
to the Board detailing any views on an anonymous basis, together
with progress made to date against previous recommendations.
Reports were the subject of detailed and constructive discussion
by the Board.
Although the Group sits outside the FTSE 350, the Board
considered facilitating an external evaluation of the Board and its
Committees during 2020. Given the changes to membership of
the Board during 2020, it was considered that the Group would
in fact benefit more from an externally facilitated review in 2021.
It was determined that the Board would therefore conduct an
internal evaluation in 2020, planning for an external evaluation in
the coming year. During 2020, the Board therefore undertook an
internal evaluation in a similar fashion to those in 2018 and 2019.
A detailed report on questionnaire responses was compiled by
the Company Secretary including anonymised feedback which
was reported to the Board. This led to a detailed discussion
and the implementation of certain recommendations including
improvements to financial reporting, adding regular management
and industry updates to Board agendas, adopting changes to
employee engagement practices and adopting regular post-
investment appraisals for significant capital expenditure projects.
During the year, the Chairman also evaluated the performance
of the Non-Executive Directors through discussions with Board
members and the Company Secretary, and informal observations.
The Senior Independent Director also held discussions with Board
members and the Company Secretary, without the Chairman
present, to appraise the Chairman’s performance. Feedback was
provided following such evaluations and reviewed by the Board.
Overall the Board considered the performance of each Director
to be effective and concluded that the Board and its Committees
provide effective leadership and that appropriate governance
and controls are in place. The Board will continue to review its
procedures, effectiveness and development in the future.
Carr's Group plc Annual Report and Accounts 2020
43
Governance
Corporate Governance Report continued
Non-Executive Director independence
The Board’s views on Non-Executive Director independence
were also reconsidered as part of the 2020 internal review. This
was afforded greater focus owing to Alistair Wannop serving as a
Non-Executive Director for more than nine years. In carrying out its
assessment, the Board noted that no issues or concerns regarding
independence had been highlighted during previous evaluations.
The Board noted that Alistair Wannop had no material business
relationships with the Company, does not hold a significant
shareholding, does not represent any shareholder, does not have
any family connections with the Company, and has not served
the Company in any capacity other than as a Non-Executive
Director. The Board accordingly determined that the independence
of Alistair Wannop was not compromised by his tenure, and
that there were no circumstances which could give rise to his
independence being questioned. The Board was entirely satisfied
that Alistair Wannop continued to exercise the level of objectivity
and challenge that would be expected of an independent Non-
Executive Director.
The Board has therefore assessed Alistair Wannop, Ian Wood
and John Worby as independent. Upon their appointment to the
Board on 1 November 2019 and 1 October 2020 respectively,
both Peter Page and Kristen Eshak Weldon were assessed by the
Board to be independent. The question of Non-Executive Director
independence is a matter which is kept under review and assessed
annually by the Board.
Non-Executive Director succession
Following the appointment of Kristen Eshak Weldon and as part
of the Board’s strategy for Non-Executive Director succession,
Alistair Wannop will stand down from the Board upon conclusion
of the AGM which will take place in January 2022. Alistair was first
appointed to the Board in September 2005. Recognising Alistair’s
deep knowledge of the Group’s activities and understanding of
agricultural industries, and given the level of Board succession
achieved during 2019 and 2020, the Board considers it appropriate
for Alistair to remain appointed for a further year to provide
continuity.
Board Committees
Audit Committee
The Audit Committee’s key responsibilities are to review
the effectiveness of the Company’s financial reporting, the
performance of the external auditor and the Group’s systems of risk
management and internal control.
During the year, the Audit Committee comprised three independent
Non-Executive Directors: John Worby (Chair), Ian Wood and
Alistair Wannop. On 1 October 2020, Kristen Eshak Weldon was
also appointed to the Committee which now comprises four
independent Non-Executive Directors. The Board considers that the
Committee meets the requirements of the Code and is appropriate
for a company of its size. In particular, the members bring financial,
agricultural and engineering experience to the Committee together
with a good understanding of the businesses within the Group
and the risks that they face. The Chairman of the Audit Committee
is a chartered accountant with recent and relevant financial
experience. The work, responsibilities and governance of the
Audit Committee are set out on pages 49 to 52.
Remuneration Committee
The Remuneration Committee’s primary role is to review and set
the reward structures for Executive Directors and other senior
management to ensure that these promote the correct behaviours
and are appropriate when considered in conjunction with the levels
of pay and benefits offered across the Group.
From 1 November 20193, the Remuneration Committee comprised
four independent Non-Executive Directors: Ian Wood (Chair),
Peter Page, John Worby and Alistair Wannop. On 1 October 2020,
Kristen Eshak Weldon also became a member of the Committee
which now comprises five independent Non-Executive Directors.
The work, responsibilities and governance of the Remuneration
Committee is set out on pages 53 to 66.
Nomination Committee
The role of the Nomination Committee is to ensure that an appropriate
balance of skills, experiences and backgrounds is achieved
across the Board, and that the Group is properly prepared for the
succession of members of the Board and senior management.
During the year, the Nomination Committee comprised of Peter
Page (Chair), Alistair Wannop, John Worby and Ian Wood4. On
1 October 2020, Kristen Eshak Weldon also became a member of
the Committee. The work, responsibilities and governance of the
Nomination Committee are set out on pages 46 to 48.
Relations with Shareholders
The Board recognises and values the importance of good
communications with all shareholders. The Group maintains
dialogue with substantial and institutional shareholders and
analysts, and hosts presentations on the preliminary and interim
results. Shareholders have access to the Company’s website at
www.carrsgroup.com.
We engage with our shareholders through our regular
communications. Significant matters relating to trading or
development of the business are disseminated to the market
by way of Stock Exchange announcements. We announce our
financial results on a six-monthly basis with all shareholders
receiving a half-year statement, and we produce trading updates
during the year. All reports and updates are made available on the
Company’s website.
3 Prior to 1 November 2019, the Committee comprised of three independent Non-Executive Directors: Ian Wood (Chairman), John Worby and Alistair Wannop.
4 Prior to 1 November 2019, the Committee comprised of Chris Holmes (Chairman), Ian Wood, John Worby and Alistair Wannop. Peter Page became a member
of the Committee on 1 November 2019 and became Committee Chair upon Chris Holmes standing down from the Board and the Committee on 7 January 2020.
44
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
The Annual General Meeting ordinarily provides all shareholders
with the opportunity to develop further their understanding of the
Company. It is an excellent forum for all Directors to engage with
private investors. All shareholders are given the opportunity to
raise questions on matters proposed for consideration at the AGM.
The Group aims to send notices of Annual General Meetings to
shareholders at least 20 working days before the meeting,
as required by the Code. Following the AGM, the voting results
for each resolution are published and are available on the
Company’s website.
COVID-19 and our January 2021 AGM
Owing to the ongoing risks associated with COVID-19,
arrangements for our January 2021 AGM will be different to
those in previous years. Members will not be able to attend the
meeting in person, but will be invited to cast their votes on the
resolutions proposed at the meeting by proxy in advance. Voting
at the meeting will take place by poll, on the basis of the proxy
votes cast in advance of the meeting. Any members who do try
to attend the AGM in person will unfortunately not be permitted
to enter the meeting owing to government restrictions and
social distancing guidelines. On the day of the AGM we will be
publishing a broadcast on the Company’s website, reflecting on
the year, providing an update on current trading, introducing Hugh
Pelham, and answering questions raised by shareholders. Written
responses to questions raised by shareholders will also be made
available on the Company’s website. We hope that our members
understand the need for caution in current circumstances and very
much look forward to returning to hosting our AGM in person in
future years.
Fair, balanced and understandable
The Directors have reviewed the financial statements and taken as
a whole consider them to be fair, balanced and understandable,
and provide the information necessary for shareholders to assess
the Group’s performance, business model and strategy.
Internal control
The Board of Directors has overall responsibility for the Group’s
systems of risk management and internal control, and for reviewing
their effectiveness, including: financial, operational and compliance
controls and risk management, which safeguard the shareholders’
investment and the Group’s assets. Such systems can only
provide reasonable and not absolute assurance against material
misstatement or loss, being designed to manage rather than
eliminate the risk of failure to achieve business objectives.
The Board of Directors is not aware of any significant losses caused
by breaches of internal control in the year. The Group operates
within a clearly defined organisational structure with established
responsibilities, authorities and reporting lines to the Board. The
organisational structure has been designed in order to plan,
execute, monitor and control the Group’s objectives effectively
and to ensure that internal control becomes embedded in the
operations. The Board confirms that the key ongoing processes
and features of the Group’s internal risk-based control system have
been fully operative throughout the year and up to the date of the
Annual Report being approved. These include: a process to identify
and evaluate business risk; a strong control environment; an
information and communication process; a monitoring system and
a regular Board review for effectiveness. The Chief Financial Officer
is responsible for overseeing the Group’s internal controls.
The Group’s internal controls systems cover controls over the
financial reporting process, including monthly reporting from
subsidiaries, its associate and joint ventures. This reporting is
subject to detailed review by the Chief Executive and the Chief
Financial Officer and detailed validation by the Group finance team,
and forms the basis for information presented to and reviewed
by the Board. All monthly reporting is prepared in line with Group
accounting policies, which are reviewed annually and are also
subject to review by the external auditors.
The management of the Group’s businesses identified the key
business risks within their operations, considered the financial
implications and assessed the effectiveness of the control
processes in place to mitigate these risks. The Audit Committee
also reviewed the effectiveness of the risk management and
internal control systems. The Board reviewed a summary of the
findings and this, along with direct involvement in the strategies
of the businesses, investment appraisal and budgeting process,
enabled the Board to report on the effectiveness of internal control.
A summary of the risk management framework and key risks to the
business are set out on pages 28 to 30.
By order of the Board
Matthew Ratcliffe
Company Secretary
Carlisle
CA3 9BA
23 November 2020
Carr's Group plc Annual Report and Accounts 2020
45
Governance
Nomination Committee Report
Peter Page
Chair of the Nomination Committee
Dear Shareholder
I present this report on
the role of the
Nomination Committee
and its activities during
the year.
Nomination Committee Highlights
• Appointment of Hugh Pelham as
CEO Designate
• Appointment of Peter Page as
Non-Excutive Chairman
• Appointment of Kristen Eshak
Weldon as independent Non-
Executive Director
•
Internal evaluation completed
with external evaluation
planned for FY2021
Introduction
The Nomination Committee ensures
that the Board and senior management
team possess the right balance of skills,
experience and knowledge to support the
Group’s strategy. Central to this is making
sure that effective succession plans are in
place to fill vacancies on the Board, and
in management teams, alongside robust
and transparent procedures for identifying
suitable candidates.
I joined the Board in November 2019 and
took over as Chairman of the Board and
Chair of the Nomination Committee upon
Chris Holmes standing down at the AGM in
January 2020.
In July 2020, we announced the recruitment
of Kristen Eshak Weldon to the Board as
an independent Non-Executive Director.
Kristen joined the Board on 1 October 2020
having previously been Head of Food and
Downstream Strategy at Louis Dreyfus
Company, where she focused on innovation
and investments across global agriculture.
Prior to this, Kristen spent 13 years at
Blackstone where she was Co-Head of the
London office for the company’s $75 bn
Hedge Fund Solutions business, leading
their work on investment opportunities
worldwide.
In September 2020, we announced that
Hugh Pelham will be joining the Board
on 4 January 2021 as Chief Executive
Officer Designate and will take over as
Chief Executive upon Tim Davies standing
down at the AGM later that month. Hugh
brings over 30 years’ experience in leading
growing businesses across various sectors,
having most recently been Global President
of Minova, part of ASX-listed Orica, a global
manufacturer and supplier of chemical
and mechanical earth control products,
adhesives and support equipment. Prior
to this Hugh spent four years leading
Wood Group Industrial Services, a supplier
of specialist coatings, access and fabric
maintenance services to the oil and gas,
marine and rail industries. Hugh’s broad
experience and strong track record of
generating long-term value will be of real
value to the Group.
More information on the activities of the
Committee, including the recruitment
processes which led to the appointment of
Kristen and Hugh, is set out on the pages
which follow.
46
Carr's Group plc Annual Report and Accounts 2020
Role of the Committee
The primary responsibilities of the
Nomination Committee are:
Reviewing the structure, size and
composition of the Board and
monitoring the range of skills,
knowledge and experience required for
the Board to operate effectively and to
deliver the Group’s strategy;
Overseeing Board and senior
management succession planning,
including setting objective
selection criteria and transparent
recruitment processes, and making
recommendations to the Board in
relation to the appointment of Executive
and Non-Executive Directors; and
Setting the Group’s policy on diversity
and inclusion and overseeing its
implementation in succession planning
across the Group.
Activities of the Committee
The Committee met on six scheduled
occasions during the year to consider the
following matters:
•
the Committee’s terms of reference to
ensure they appropriately reflect the
Committee’s remit;
the succession plans in place for the
Board and senior management across
the Group;
recruitment for Board appointments;
the structure, size, composition and
diversity of the Board, its committees
and senior management across the
Group;
the Group’s policy on diversity and
inclusion; and
the Group’s talent management, training
and development programmes.
•
•
•
•
•
Strategic Report
Governance
Financial Statements
Attendance at meetings of the Committee was as follows:
Member
Peter Page (Chair)*
John Worby
Ian Wood
Alistair Wannop
Chris Holmes*
Meetings
attended
100%
100%
100%
100%
100%
* Peter Page was appointed to the Committee on 7 January 2020 at which
point Chris Holmes stood down. Each attended 100% of meetings during
their tenure.
Changes to the Committee
I joined the Board as an independent Non-Executive Director,
Chairman Designate and a member of the Committee on
1 November 2019. I subsequently became Non-Executive
Chairman of the Group and Chair of the Committee on 7 January
2020 upon Chris Holmes standing down. After the year end,
Kristen Eshak Weldon jointed the Board on 1 October 2020 and
became a member of the Committee.
Board evaluation
During the year, the Board conducted an internal evaluation of the
Board and its Committees. The Board’s previous external evaluation
took place in 2017, but owing to succession on the Board during
2020, the Committee considered it appropriate for an external
evaluation to take place in 2021.
The 2017 external review was facilitated by corporate governance
specialists Independent Audit Limited and reviewed the size,
composition and effectiveness of the Board and its Committees.
That review, which generated positive feedback, confirmed
that the Board and its Committees were appropriately
constituted and provided effective management of the Group
as a whole. The review also involved a consideration of the
continued independence of the Non-Executive Directors and
the commitment required from each in order to properly fulfil
their duties. Following the review, and in consideration of all
circumstances, it was determined by the Board that all Directors
committed sufficient time to properly fulfil their responsibilities and
that John Worby, Ian Wood and Alistair Wannop were considered to
be independent.
The internal review during 2020, built upon the 2017 external
review, and further internal reviews undertaken in 2018 and 2019.
For more information on the process see page 43. The review
involved a detailed consideration of the effectiveness of the
Board and its committees together with a review of diversity
and the range of skills, knowledge and experience required to
effectively deliver the Group’s strategy. The review also reflected
on the previous year, and on decisions made by the Board, in
order to identify where its effectiveness can be enhanced. The
2020 review also considered the continued independence of the
Non-Executive Directors. That review concluded that the Board
and its Committees are indeed appropriately constituted, and that
Peter Page, John Worby, Ian Wood and Alistair Wannop remain
independent.
Group succession planning and development
The Group’s succession strategy focuses upon ensuring that
appropriate and sufficient employees are recruited or developed
internally to meet the future management and leadership
needs of the Group, taking into account continued growth and
Group strategy.
During the year the Committee reviewed the Group’s broader
succession and development plans with the Group Head of HR
and CEO.
Recruitment processes for leadership and senior positions across
the Group are managed under the supervision of the Group Head
of HR inviting both internal and external candidates. Independent
recruitment consultants are also appointed where appropriate
taking into account the requirements of the Group.
In recent years, the Group has made significant progress in the
implementation of its senior management succession plans. This
progress continued during 2020 with a significant reorganisation
of management teams in our UK Agriculture business under
the leadership of the recently appointed Managing Director. Our
Engineering division also saw significant change with a greater
focus on integration and the appointment of a new President in our
Global Technical Services business.
Across the Group our career pathway and employee development
initiatives continue to evolve which are designed to attract, retain
and develop the best talent. Further details of those initiatives are
described on pages 32 to 33.
Board succession
In addition to my appointment to the Board in November 2019,
which was detailed in last year’s report, the Nomination Committee
led two Board recruitment exercises during the year.
As part of the Company’s long-term succession planning for
Non-Executive Directors, the Board announced the appointment
of Kristen Eshak Weldon in July 2020. That recruitment process
was led by the Committee who, following a competitive tender
exercise, appointed recruitment consultants Independent Search
to assist. In selecting candidates, the Committee considered a
broad range of important skills and characteristics. The Committee
also considered the balance of skills, experience and knowledge
present across the Board, the culture of the Group and the benefits
of diversity. Kristen was appointed to the Board on 1 October 2020
as an independent Non-Executive Director and as a member of the
Audit, Remuneration and Nomination Committees.
During the year the Committee undertook a rigorous search for a
Chief Executive Officer to succeed Tim Davies who will be standing
down from the Board at the AGM in January 2021. The Committee
engaged recruitment consultants Spencer Stuart following a
competitive tendering process. The search involved an in-depth
analysis of the skills, knowledge and experience which would best
benefit the Group and the development of a detailed candidate
profile. The search considered a large pool of 426 potential
candidates from a broad variety of backgrounds, industries, and
countries.
Carr's Group plc Annual Report and Accounts 2020
47
Governance
Nomination Committee continued
Of the total candidate pool identified, 35 individuals were
considered further for the position from both internal and external
sources (of that total, 26 candidates were male, eight were female
and one was undisclosed). Five shortlisted candidates were
ultimately identified, which led to the Committee’s recommendation
that the Board appoint Hugh Pelham to the position.
Hugh’s appointment was announced on 24 September 2020. He
will join the Board as an Executive Director and Chief Executive
Officer Designate on 4 January 2021 and, subject to the approval
of shareholders, will take over as Chief Executive Officer at the
conclusion of the AGM which is currently expected to take place on
12 January 2021.
Alistair Wannop has served on the Board since September 2005.
As part of the Board’s long-term succession strategy, and following
the appointment of Kristen Eshak Weldon, it is planned that Alistair
will stand down at the conclusion of the Group’s AGM in January
2022. Given the level of Board succession achieved during 2019
and 2020, and recognising Alistair’s deep knowledge of the Group’s
activities and understanding of agricultural industries, the Board
considers it appropriate for Alistair to remain appointed for another
year to ensure continuity.
Diversity and inclusion
The Group’s principal concern when making employment
decisions is ensuring that candidates possess the skills, knowledge
and experience, or the potential to develop the required skills,
knowledge and experience, to meet the requirements of the Group.
The Board is aware of the benefits to the Group of diversity,
including gender diversity, and of the recommendations of the
Hampton Alexander Review. Diversity is an important consideration
when determining the needs of the Group and its businesses when
making recruitment decisions. Whilst the Board does not currently
set any specific diversity targets, as part of the Group’s employee
survey (for more information please see page 32), information
will be collected on the diversity of our people from across the
Group. This information will be reviewed by the Committee and
the Board together with the Group Head of HR in order to enhance
understanding of diversity across the Group and to enable the
development of policy and/or targets where appropriate.
The Group operates a strict equal opportunities policy. All
appointments are made on the basis of merit and the requirements
of the Group regardless of factors such as race, colour, nationality,
religion or belief, gender, marital or civil partnership status, family
status, pregnancy, sexual orientation, gender identity, gender
reassignment, disability or age. There are no differences in pay
structures for persons of different genders performing similar roles.
Gender Breakdown
Group employees
Senior managers
Direct reports to senior managers
Total
Male
Female
Total
Male
Female
Total
Male
Female
1,146
838
308
13
9
4
42
26
16
Re-Election
At the AGM on 12 January 2021, Hugh Pelham and Kristen Eshak
Weldon will stand for election by shareholders for the first time
since being appointed to the Board. Tim Davies will not stand for
re-election owing to him standing down from the Board. All other
Directors will stand for re-election in accordance with best practice
and the Corporate Governance Code. The Board will set out in the
Notice of Annual General Meeting its reasons for supporting the
re-election of each Director. Their biographical details on pages 38
to 39 demonstrate the range of experience and skills which each
brings to the benefit of the Company.
On behalf of the Board
Peter Page
Chair of the Nomination Committee
23 November 2020
48
Carr's Group plc Annual Report and Accounts 2020
Audit Committee Report
Strategic Report
Governance
Financial Statements
John Worby
Chair of the Audit Committee
Dear Shareholder
On behalf of the Audit
Committee, I am
pleased to present this
report to shareholders
which highlights the
areas of review during
the year and explains
how the Committee
has reviewed and
discharged its
responsibilities.
Audit Committee Highlights
• Adoption of IFRS 16
• Consideration of impact of
COVID-19
• Appointment of Kristen Eshak
Weldon to the Committee
Introduction
This has been the second year in which
KPMG LLP (KPMG) has acted as the Group’s
auditor, having been first appointed by
shareholders at the AGM on 8 January 2019
following the recommendation of the Board
and the tender process conducted by the
Committee in the spring of 2018.
Composition of Committee and
Meetings
During the year, the Audit Committee
comprised three Non-Executive Directors;
John Worby, who is Chair of the Committee,
Ian Wood and Alistair Wannop. On 1
October 2020, Kristen Eshak Weldon
became a member of the Committee upon
her appointment to the Board.
The Chair of the Committee has recent
and relevant financial experience and
collectively members of the Committee
have in-depth knowledge and experience
of agricultural and engineering industries,
and a good understanding of the Group’s
undertakings. Details of Committee
members’ qualifications can be found on
pages 38 to 39.
The Audit Committee met four times
during the year, and has an agenda linked
to the Group financial calendar. It invites
the Chairman, the Chief Executive, the
Chief Financial Officer, the Head of Group
Finance, the Head of Business Finance,
the Head of Internal Audit and the external
auditor to attend its meetings. During the
year, the Committee met with each of the
Head of Internal Audit and the external
auditor without the Executive Directors or
other senior management being present.
The Committee has met twice since the
end of the financial year to consider internal
audit work and the results and Annual
Report for the year ended 29 August 2020.
Responsibilities
The key responsibilities of the
Committee are to provide effective
governance over the integrity of the
Company’s financial reporting and the
effectiveness of its systems of internal
control and risk management.
Under its terms of reference, the
Committee is required, amongst other
things, to:
Monitor the integrity of the financial
statements of the Company including
the appropriateness of the accounting
policies adopted and whether the
Annual Report was fair, balanced and
understandable;
Keep under review and evaluate the
effectiveness of the Company’s internal
financial control, and other internal
controls and risk management systems;
Appraise the Board on how the
Company’s prospects are assessed;
Oversee the relationship with
the external auditor, making
recommendations to the Board in
relation to its appointment, remuneration
and terms of engagement;
Monitor and review the effectiveness of
the external audit including the external
auditor’s independence, objectivity and
effectiveness and to approve the policy
on the engagement of the external
auditor to supply non-audit services;
Review and approve the mandate of the
internal auditor, evaluate the work and
monitor the effectiveness of the internal
auditor, and approve the appointment
or removal of the Head of Internal Audit;
and
Review the adequacy of the Company’s
whistleblowing and anti-bribery
arrangements.
The Committee’s terms of
reference can be found on the
Company’s website
www.carrsgroup.com.
Carr's Group plc Annual Report and Accounts 2020
49
Governance
Audit Committee Report continued
Main activities during the year
Set out below is a summary of the key areas considered by the
Committee during the year and up to the date of this report.
Financial Reporting
During the year the Audit Committee reviewed reports and
information provided by the Chief Financial Officer, and the
external auditor in respect of the half year and full year results
and Annual Report.
An important responsibility of the Audit Committee is to review
and agree significant estimates and judgements made by
management. To satisfy this responsibility, the Committee reviewed
a written formal update from the Chief Financial Officer on such
issues at the two meetings that reviewed the half year and year
end results, as well as reports from the external auditors. The
Committee carefully considered the content of these reports in
evaluating the significant issues and areas of judgement across
the Group.
The key areas of judgement in the year were as follows:
• Contract risks in the Engineering division, including the risks
associated with the judgemental nature of revenue and profit
recognition over time. The Committee reviewed a selection of
significant active contracts, challenging management’s forecast
outturns and profit recognition assessments and examining
commercial processes and controls to test the recoverability
of contract balances. The Committee determined that the
judgements adopted by management were appropriate.
• The valuation of the Carr’s Group defined benefit pension
scheme assets and obligations. The Committee reviewed
valuations of the scheme’s investments, and the key actuarial
assumptions used to value the scheme obligations. The
assumptions made were reviewed against market data in
conjunction with independent actuarial specialists, to assess
their appropriateness and the disclosures on the sensitivity of
the obligations to changes in such assumptions were reviewed.
The Committee was satisfied that the scheme’s assets were
appropriately valued, that the assumptions adopted in relation
to the scheme’s liabilities were appropriate, and that disclosures
made in relation to the scheme were appropriate.
• The valuation of the Group’s share of the Carrs Billington
Agriculture (Operations) Ltd defined benefit scheme surplus.
The Committee evaluated the actuarial assumptions adopted in
estimating scheme obligations and reviewed asset statements
in relation to the scheme’s investments in conjunction with
actuarial specialists. The Committee was satisfied following
such review that the valuation adopted for the scheme surplus
was appropriate.
• Estimates of the recoverability of trade receivables in the
Agriculture division. The Committee reviewed key controls
within credit control processes, the estimates and policies
adopted in relation to debtors, and the adequacy of the
Company’s disclosures relating to provisions for receivables.
The Committee determined that the estimates and disclosures
made were appropriate.
• Brexit and the associated increased levels of uncertainty
of outcomes. The Committee considered the Directors’
assessment of Brexit-related sources of risk and their potential
impact on the going concern assessment and viability
statement. Potential sensitivities were challenged against the
full range of reasonably possible scenarios, and adjustments
were considered to discount rates for forecast cash flows
for any residual uncertainties. The Committee also reviewed
the reasonableness of disclosures made in the strategic
report relating to Brexit. The Committee determined that the
assessments made by management were appropriate and that
the narrative disclosures were reasonable.
• Potential goodwill impairment. The Committee challenged
the reasonableness of the future business performance
assumptions adopted by management for those businesses that
had underperformed against expectations. Factors considered
included historical performance, industry benchmarks and
where relevant the likely long-term impact of the COVID-19
pandemic. The Committee agreed with management’s view that
no impairments were necessary.
Inventory provisioning. The Committee reviewed
management’s policies and related processes to monitor
inventory movement, particularly given the potential impact
of Brexit and COVID-19, and determined that no changes to
inventory provisioning was necessary.
•
• Adoption of new accounting standard IFRS 16. The Committee
reviewed the accounting policies adopted to meet the
requirements of IFRS 16, management controls in relation to
key judgements, and the impact of adoption of the standard
on the financial statements including relevant disclosures.
The Committee was satisfied with the manner in which the
accounting standard had been adopted and reflected in the
financial statements.
• Changes to the fair value of contingent consideration in
relation to the acquisitions of Animax, NuVision and NW Total.
The Committee challenged management’s assessments of the
fair value of the contingent consideration likely to be payable
as potential earn-out payments for those acquisitions and
determined that such assessments were appropriate.
The Committee, further to the Board’s request, has reviewed
the Annual Report and financial statements with the intention of
providing advice to the Board on whether, as required by the Code,
‘the Annual Report and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Company’s performance, business
model and strategy’.
To make this assessment, the Committee reviewed a report
prepared by the Chief Financial Officer outlining the relevant key
matters worthy of consideration. The Committee was satisfied that,
where relevant, all the key events and issues which have been
reported to the Board in the CEO’s reports during the year, both
good and bad, have been adequately referenced or reflected
within the Annual Report.
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Governance
Financial Statements
The Committee has also reviewed the Group’s going concern
and viability statement disclosures, particularly in relation to
the ongoing uncertainties associated with COVID-19 and Brexit.
It received a written report prepared by the Chief Financial
Officer which enabled it to review the base assumptions and
various sensitised scenarios throughout the forecast period. The
Committee was comfortable with the disclosures made.
Internal Control and Risk Management
During the year the Committee continued to monitor the
effectiveness of the Group’s internal control and risk management
systems and at the end of the year carried out a review of the
effectiveness of such systems.
The Committee reported to the Board that it had reviewed, and
was satisfied with, the effectiveness of the Company’s internal
control and risk management systems.
External Audit
KPMG was appointed as external auditor of the Group at the AGM
in January 2020, having first been appointed at the AGM in January
2019 following the recommendation of the Board and a competitive
tender process managed by the Audit Committee which took place
during 2018. KPMG’s current engagement partner is Nick Plumb,
who has been in place since commencement of the audit for the
2019 financial year. The Audit Committee assessed the qualifications,
expertise and independence of KPMG as auditors as part of the
tender process and updated its assessment during the year.
Following approval by shareholders to appoint KPMG in January
2020. the Audit Committee reviewed and approved the terms of
engagement and remuneration of the external auditors for the
2020 financial year.
Audit Effectiveness
The effectiveness of the external audit process is dependent on
appropriate audit risk identification at the start of the audit cycle.
KPMG presented its detailed audit plan to the Committee in June
2020, identifying their assessment of these key risks.
The assessment of the effectiveness and quality of the audit process
and addressing these key risks is formed by, amongst other things,
the reporting from the auditors. In addition, each year, the Audit
Committee assesses its performance and the effectiveness of
the external auditor through a questionnaire completed by Audit
Committee members and members of the Group’s senior finance
team. Whilst the Committee was satisfied with the robustness of
the audit, the questionnaire highlighted some concerns with the
efficiency of the audit process which were discussed in detail with
KPMG through a thorough debrief process. It was agreed that
improvements would be made for the 2020 audit.
Auditor Independence
The Group meets its obligations for maintaining an appropriate
relationship with the external auditor through the Audit Committee,
whose terms of reference include an obligation to consider and
keep under review the degree of work undertaken by the external
auditor other than the statutory audit, to ensure such objectivity
and independence is safeguarded.
In accordance with the Auditing Practices Board Ethical Standards,
the Group’s external auditor must implement rules and requirements
which include that none of their employees working on our audit can
hold any shares in the Company. The external auditor is also required
to tell us about any significant facts and matters that may reasonably
be thought to bear on their independence or on the objectivity of the
lead partner and the audit team. The lead partner in the audit team
must change every five years.
The Audit Committee annually reviews the Company’s Non-
Audit Services policy, updating and approving the policy where
appropriate. The objective of the policy is to ensure that the
provision of any such services does not impair, or is not perceived
to impair, the external auditors’ independence or objectivity. The
policy imposes guidance on the areas of work that the external
auditors may be asked to undertake and those assignments where
the external auditors should not be involved.
There is a further category of services for which a case-by-case
decision is necessary. The policy can be viewed on the Company’s
website www.carrsgroup.com.
In order to ensure that the policy is effective, and the level of
non-audit fees is kept under review, all non-audit services must
be approved by the Chief Financial Officer and reported to the
Committee. Prior approval of the Committee is also required before
the external auditor is engaged to provide non-audit services costing
in excess of £25,000 in aggregate. During the 2020 financial year, there
was no non-audit work undertaken by the Group’s external auditor.
The Committee concluded that it was satisfied with the
independence of KPMG as auditors and that it should recommend
their reappointment to the Board.
Internal Audit
The Committee is responsible for monitoring the performance and
effectiveness of the Company’s internal audit activities.
During the year, the Committee reviewed and approved the
internal audit plan which is devised from assessments across the
Group’s operations and aligned to the Group risk framework as
well as business-specific risks. On an annual basis, the Committee
also reviews and approves the Group’s internal audit charter which
describes the role and mandate of the internal audit function.
The internal audit plan was significantly impacted from March 2020
by the onset of the COVID-19 pandemic, particularly owing to the
Group’s imposition of travel restrictions. During this period, and to
reflect changes to risks across the Group, internal audit resources
were refocused towards business continuity planning, the
maintenance of control environments whilst working remotely, and
the Group’s ongoing ERP implementation project. During 2020, the
Committee considered the internal audit plan regularly to ensure
that internal audit activity remained aligned to any emerging risks.
At each of the Committee’s meetings during the year, the Group’s
Head of Internal Audit provided updates on internal audit activities.
Internal audit findings, together with responses from management,
were considered by the Committee and, where appropriate,
challenged.
Carr's Group plc Annual Report and Accounts 2020
51
Governance
Audit Committee Report continued
The Committee also keeps the performance and effectiveness
of the internal audit function under review and in doing so it also
assesses the quality, experience and expertise within the internal
audit function. The Committee was satisfied that the internal audit
function continues to operate effectively, despite the challenges
brought by COVID-19, and that the expertise and level of resource
available to internal audit were appropriate.
Since the year end, the Committee has agreed the internal audit
plan for 2021, which will continue to be reviewed on a quarterly
basis to respond to emerging risks or challenges in completing the
audit programme as the COVID-19 pandemic continues.
Other activities
The Committee also reviewed its terms of reference, its
effectiveness, the Group’s policies on whistleblowing, business
ethics and on the prevention of bribery and modern slavery.
John Worby
Chair of the Audit Committee
23 November 2020
52
Carr's Group plc Annual Report and Accounts 2020
Remuneration Committee Report
Strategic Report
Governance
Financial Statements
Annual Statement
The Committee’s report is presented in the
following sections:
1. This Annual Statement, which
summarises the key considerations
of the Committee during the year and
forms part of the Annual Report on
Remuneration.
2. The Directors’ Remuneration Policy,
which sets out the Policy for the
Executive Directors, Chairman and
Non-Executive Directors. The Directors’
Remuneration Policy will be put to
shareholders at the AGM due to take
place on 12 January 2021. Changes to
the previous policy, which was approved
by shareholders at the AGM on 9
January 2018, are summarised below.
3. The Annual Report on Remuneration,
which sets out how the Remuneration
Policy has been applied in 2019/20,
the remuneration received by Directors
for the year and how the policy will be
applied during 2020/21. The Annual
Report on Remuneration will be subject
to an advisory shareholder vote at
the AGM.
Performance and Remuneration in
2019/20
Whilst full year performance was ahead
of the Board’s revised expectations, it fell
short of the original budget with the result
that no annual bonus was payable relating
to financial targets.
Adjusted profit before tax of £14.9m was
17.4% below the prior year when the Group
achieved a record performance of £18.0m.
Adjusted Earnings Per Share was also down
to 11.9p (2019: 14.6p).
Non-financial targets were achieved during
the year, in relation to which annual bonus
was payable. The financial and strategic
targets set by the Committee, together
with the resulting remuneration payable to
the Executive Directors, are detailed in the
Remuneration Committee’s Report which
follows.
Key matters for consideration in
2019/2020
The Committee maintains a schedule of
matters for consideration which aligns
with its terms of reference and ensures
that changes to the corporate governance
framework and remuneration best practice
are considered by the Committee when
appropriate. The areas of focus for the
Committee are set out in the Annual Report
on Remuneration on the pages which follow.
During the year, the Committee undertook
a review of its existing Directors’
Remuneration Policy. The proposed policy,
which will be put to shareholders at the
AGM in January 2021, includes certain
changes designed to ensure that it remains
in line with best practice. These are:
1. A requirement that Executive Directors
retain all shares which vest under the
Company’s Long Term Incentive Plan
(LTIP), up to a value equal to 200% of
their basic salary, for a period of two
years following the cessation of their
employment with the Company for any
reason. This requirement will apply to all
shares which vest after the Policy takes
effect, regardless of when awards were
made under the Company’s LTIP.
2. A firm commitment that all Executive
Directors – both current and future
appointments – receive an employer
pension contribution (or cash in lieu
where appropriate) at a rate that does
not exceed the employer contribution
rate available to the majority of the
Group’s UK workforce (currently 4% of
basic salary per annum). Such alignment
of pension contributions will be
achieved by no later than the end of the
Company’s current financial year ending
August 2021.
In addition to disclosing CEO pay ratios,
the Group has also reported on its UK-
wide gender pay gap. The Group’s largest
subsidiary, Carrs Billington Agriculture
(Sales) Limited has reported on its gender
pay gap since 2018.
Carr's Group plc Annual Report and Accounts 2020
53
Ian Wood
Chair of the Remuneration Committee
Dear Shareholder
On behalf of the
Remuneration
Committee and the
Board, I am pleased to
present the Report of
the Remuneration
Committee for the year
ended 29 August 2020.
Remuneration Committee
Highlights
• New Directors’ Remuneration
Policy to be considered by
shareholders at January 2021
AGM
• Executive benchmarking
exercise undertaken as part
of CEO succession planning
process
• Appointment of Peter Page and
Kristen Eshak Weldon to the
Committee
Governance
Remuneration Committee Report continued
During the year, the Board appointed Peter Page who became
Non-Executive Chairman on 7 January 2020. After the year end, the
Board appointed Kristen Eshak Weldon as an independent Non-
Executive Director and Hugh Pelham as Chief Executive Officer
Designate. Kristen joined the Board on 1 October 2020. Hugh will
be joining the Board on 4 January 2021 and, subject to shareholder
approval, will become Chief Executive Officer upon conclusion of
the AGM on 12 January 2021. Whilst neither Kristen nor Hugh have
served during the financial year ended 29 August 2020, full details
of their remuneration are set out in the report which follows.
Inflationary salary increases of 1% were awarded to the Executive
Directors effective 1 September 2020, consistent with the broader
workforce.
After the end of the financial year, and as part of the Board’s CEO
succession planning process, the Committee reviewed Executive
Director salaries. This highlighted that Neil Austin’s remuneration
was significantly below the market. The Committee noted that
Neil’s salary had increased by an average of 1.8% per annum
since appointment in 2013. Reflecting the significant contribution
made by Neil, and his growth in role since joining the Board, the
Committee determined that it would be appropriate to increase
Neil’s basic annual salary by 17.5% from 1 November 2020 to
£251,000. Neil has received consistently strong Board approval
during his tenure and will be integral to a smooth CEO transition.
The Committee carried out a market benchmarking exercise as
part of its review, and noted that the increased salary fell within
a market competitive range (albeit below median). Taking into
consideration changes to pension contributions for Executive
Directors (as set out in the report which follows), the overall
increase to Neil Austin’s fixed remuneration is 6.3%. With this in
mind, the Committee is confident in its salary proposal, which it
considers to be fair and not excessive.
For 2020/21, the maximum annual bonus for the Executive
Directors will remain 100% of salary, with 25% of any amount
awarded being deferred for two years in the form of shares. The
Committee also intends to grant LTIP awards of 100% of salary,
which will be based upon stretching EPS targets.
I hope that you are able to support the Remuneration Committee’s
Report, and the Directors’ Remuneration Policy at the forthcoming
AGM on 12 January 2021.
Ian Wood
Chair of the Remuneration Committee
23 November 2020
Remuneration Policy
This part of the report sets out the remuneration policy for the
Group and has been prepared in accordance with The Large and
Medium-Sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013 (as amended).
The current policy was approved by the shareholders at the AGM
which took place on 9 January 2018, receiving a 99.7% proxy vote
in favour. This policy builds upon the previous policy and includes
the following notable changes which align with the Corporate
Governance Code 2018 and emerging best practice:
1. A requirement that Executive Directors retain all shares which
vest under the Company’s Long Term Incentive Plan (LTIP),
up to a value equal to 200% of their basic salary, for a period
of two years following the cessation of their employment with
the Company for any reason. This requirement will apply to all
shares which vest after the Policy takes effect, regardless of
when awards were made under the Company’s LTIP.
2. A firm commitment that all Executive Directors – both current
and future appointments – receive an employer pension
contribution (or cash in lieu where appropriate) at a rate that
does not exceed the employer contribution rate available to
the majority of the Group’s UK workforce (currently 4% of basic
salary per annum). Such alignment of pension contributions will
be achieved during the Company’s current financial year ending
August 2021.
Further information on the above changes is set out in the
remuneration policy table on the pages which follow.
The new policy will be put to shareholders for consideration and
approval at the AGM taking place on 12 January 2021.
The role of the Committee
The primary role of the Remuneration Committee is to make
recommendations to the Board on the Company’s policy for
executive remuneration. The Committee also has delegated
responsibility for determining the remuneration and benefits of
the Chairman, the Executive Directors and senior management
including the Company Secretary.
Key responsibilities include:
• determining the framework for the remuneration of the Group’s
Executive Directors, senior management and Chairman;
reviewing workforce remuneration and related policies;
•
• determining the total remuneration packages, authorising terms
and conditions, and issuing contracts for the Board;
• approving the design and determining the targets for
•
performance related pay schemes of the Executive Directors;
reviewing the ongoing appropriateness and relevance of the
Remuneration Policy to ensure that is it aligned with the culture
and strategy of the Group;
• ensuring that the Group rewards fairly and responsibly, with
clear links to both corporate and individual performance; and
reviewing the design of any share incentive plans for approval
by the Board and shareholders.
•
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Financial Statements
Overview of policy
When setting the policy for Directors’ remuneration, the Committee
takes into account the overall business strategy, considering the
long-term interests of the Group, with the aim of incentivising the
delivery of rewards to the Group’s shareholders, workforce and
broader stakeholders.
The Group’s policy is that the overall remuneration packages
offered should be sufficiently competitive to attract, retain and
motivate high-quality executives and to align the rewards of the
Executive Directors with the progress of the Group, whilst giving
consideration to salary levels in similar size quoted companies in
similar industry sectors and views of shareholders.
The remuneration package is split into two parts:
• a non-performance related element represented by basic
salary, benefit and pension; and
• a performance related element in the form of an annual bonus
and a Long Term Incentive Plan.
However, there are some differences in the Executive Directors’
Remuneration Policy compared to that for the wider workforce,
which the Committee believes are necessary to reflect the
differing levels of seniority and scope of responsibility. A greater
weight is placed on performance-based pay through the
quantum and participation levels in incentive schemes to ensure
the remuneration of the Executive Directors is aligned with the
performance of the Group and the interests of shareholders.
In 2019 we formalised our employee engagement activities with
Alistair Wannop being appointed as the Board’s Representative for
Employee Engagement. Whilst we were able to carry out some initial
planned activities in the first half of the year, the onset of COVID-19
in the second half prevented group sessions with staff groups from
taking place. Employee engagement activities therefore turned
towards regular announcements and video blogs on business
activities through the Company’s intranet, CarrsConnect. In late
2020, we launched an employee engagement survey which will for
the first time seek feedback from employees on remuneration.
Considerations of conditions elsewhere in the Group
In determining the remuneration of the Group’s Directors, the
Committee takes into account the pay arrangements and terms
and conditions across the Group as a whole. The Committee seeks
to ensure that the underlying principles which form the basis for
decisions on Directors’ pay are consistent with those on which pay
decisions for the rest of the workforce are taken. For example, the
Committee takes into account the general salary increase for the
broader employee population when conducting the salary review
for the Executive Directors.
Consideration of shareholder views
In formulating this policy, the Committee has taken into
consideration the views and policies of shareholders and proxy
agencies. Proposed changes to the policy were communicated
to major shareholders prior to its formation, and all feedback
taken into consideration. Advice was also taken on best practice
from appropriately qualified remuneration advisers Aon plc and
PricewaterhouseCoopers LLP. The views offered to the Committee
have been taken into account in the policy below. The Committee
welcomes feedback from all of the Group’s stakeholders at all times.
Remuneration Policy table
Element
Purpose and link to strategy
Policy and approach
Base salary
To attract and retain the
best talent.
Salary levels (and subsequent salary increases) are set taking into
consideration a number of factors, including:
Reflects an individual’s
experience, performance
and responsibilities within
the Group.
•
level of skill, experience and scope of responsibilities
of individual;
• business performance, economic climate and market conditions;
•
increases elsewhere in the Group; and
• external comparator groups (used for reference purposes only).
Salaries are normally reviewed annually with any increase effective
1 September each year.
Opportunity
There is no formal
maximum; however,
increases will
normally align with
the general increase
for the broader
employee population
of the Group.
More significant
increases may be
awarded from time
to time to recognise,
for example,
development in
role and change
in position or
responsibility.
Current salary levels
are disclosed in the
Annual Report on
Remuneration.
Carr's Group plc Annual Report and Accounts 2020
55
Governance
Remuneration Committee Report continued
Element
Pension
Purpose and link to strategy
Policy and approach
Provides a competitive
and appropriate pension
package that is aligned
with arrangements across
the Group.
Executive Directors are entitled to participate in a defined
contribution pension arrangement or to receive a cash alternative
to those contributions.
Subject to as provided below, Company contributions for all
Executive Directors are at a rate which does not exceed the
contribution rate available to the majority of the UK workforce
(currently 4%).
Tim Davies is standing down from the Board upon conclusion of the
AGM on 12 January 2021. He will remain employed by the Company
until 22 August 2021 and, during such period, will continue to
receive his existing employer pension contribution of 15%.
To the extent that pension contributions exceed annual tax-free
allowances, Executive Directors will be entitled to receive payment
through ordinary payroll in lieu of pension contributions.
Benefits provided include permanent health insurance, private
medical insurance and life assurance. Relocation benefits may also
be provided in the case of recruitment of a new Executive Director.
The benefits provided may be subject to minor amendment from
time to time by the Committee within this policy.
The Company may reimburse any reasonable business related
expenses incurred in connection with their role (including tax
thereon if these are determined to be taxable benefits).
Bonus levels and appropriateness of performance measures and
weighting are reviewed annually to ensure they continue to support
our strategy. Bonuses are capped at 100% of base salary. 25% of any
bonus earned will be deferred into awards over shares, with awards
normally vesting after a two-year period.
Performance is measured against stretching targets. These
may include financial and non-financial measures. Financial
measures will account for the majority and will typically include
a profit related target. Performance targets will be disclosed
retrospectively. The threshold level of bonus under each
measure is 0%.
The cash element of the bonus is usually paid in November each
year for performance in the previous financial year.
Dividends will accrue on deferral awards over the vesting period
and be paid out either as cash or as shares on vesting and in
respect of the number of shares that have vested.
A malus and clawback mechanism applies in specific
circumstances including in the event of a material misstatement
of the Group’s accounts and also for other defined reasons
including material financial misstatement, reputational damage,
gross misconduct, fraud, error in the assessment of performance
measures and corporate failure. These provisions apply to both the
cash and deferred elements of the bonus.
An HMRC approved SAYE scheme is available to eligible staff,
including Executive Directors.
Opportunity
Up to a maximum
rate not exceeding
that available to the
majority of the UK
workforce (currently
4%).
Market rate
determines value.
There is no prescribed
maximum level but
the Remuneration
Committee monitors
the overall cost of
benefits to ensure
that it remains
appropriate.
Maximum of 100% of
base salary.
The schemes are
subject to the limits
set by HMRC from
time to time.
Benefits
To aid retention and remain
competitive in the market
place.
Annual bonus Designed to reward
delivery of key strategic
priorities during the year.
Save As You
Earn (SAYE)
To encourage employee
involvement and
encourage greater
shareholder alignment.
56
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Element
Purpose and link to strategy
Policy and approach
Long Term
Incentive Plan
(LTIP)
To motivate and incentivise
delivery of sustained
performance over the
longer term, and to support
and encourage greater
shareholder alignment.
Annual awards of performance shares which normally vest after
three years subject to performance conditions.
Award levels and performance conditions required for vesting are
reviewed annually to ensure they continue to support the Group’s
strategy. Annual awards are capped at the equivalent of 100% of
base salary at the date of award.
Opportunity
Maximum of 100% of
base salary for annual
awards.
Exceptional awards
can be made of up to
200% of base salary.
In accordance with the rules of the LTIP, which were approved
by shareholders at the AGM on 8 January 2013, in circumstances
considered by the Committee to be exceptional, single awards in
excess of 100% of base salary can be made, up to a maximum of
200% of base salary at the date of the award.
Awards are currently based solely upon an EPS growth measure,
although the Committee reserves the right to introduce further or
alternative performance measures where considered appropriate
from time to time and following consultation with major shareholders.
25% vests at threshold performance. There is straight-line vesting
between threshold and maximum.
A two-year post-vesting holding period applies to the net of tax
shares for awards granted in 2018 and beyond.
A malus and clawback mechanism applies in specific
circumstances including in the event of a material misstatement of
the Group’s accounts and also for other defined reasons.
Shareholding
guidelines
To provide alignment with
shareholder interests.
Executive Directors are required to build up a shareholding
equivalent to 200% of base salary over a five-year period.
Post-cessation
shareholding
To provide alignment with
shareholder interests in the
long term.
Executive Directors are required to retain all shares acquired on
vesting under the Company’s LTIP, up to a value equal to 200% of their
basic salary, for a period of two years following the cessation of their
employment with the Company for any reason. This requirement will
apply to all shares which vest after the Policy takes effect, regardless
of when awards were made under the Company’s LTIP.
N/A
N/A
Chairman’s and Non-Executive Directors’ Remuneration
Non-Executive
Director fees
To attract and retain a
high-calibre Chairman and
Non-Executive Directors
by offering market-
competitive fee levels.
Remuneration reflects:
•
the time commitment and responsibility of their roles;
• market rate; and
•
that they do not participate in any bonus, pension or
share-based scheme.
Our policy is for the Executive Directors to review the remuneration
of Non-Executive Directors annually following consultation with the
Chairman. The Chairman’s remuneration is reviewed annually by the
Remuneration Committee.
The Chairman and the Non-Executive Directors are entitled to
reimbursement of reasonable expenses. They may also receive
limited travel or accommodation-related benefits in connection
with their role as a Director.
The Non-Executive Directors will not participate in the Group’s
share, bonus or pension schemes.
Non-Executive Directors are engaged for terms of one year subject to
appointment and reappointment at the Company’s AGM.
Non-Executive
Directors receive
a single fee for
all services to the
Company. Levels
of fee are reviewed
annually with any
increases normally
aligning with general
increases for the
broader employee
population of
the Group.
Carr's Group plc Annual Report and Accounts 2020
57
Governance
Remuneration Committee Report continued
Approach to recruitment remuneration
The remuneration package for a new Executive Director would
be set in accordance with the terms of the Company’s approved
remuneration policy in force at the time of appointment.
Buy-out awards
In addition, the Committee may offer additional cash and/or
share-based elements (on a one-time basis or ongoing) when
it considers these to be in the best interests of the Group (and
therefore shareholders). Any such payments would be limited to
a reasonable estimate of value of remuneration lost when leaving
the former employer and would reflect the delivery mechanism (i.e.
cash and/or share-based), time horizons and whether performance
requirements are attached to that remuneration.
Maximum level of variable pay
The maximum initial level of long-term incentives which may be
awarded to a new Executive Director will ordinarily be limited to
200% of base salary (i.e. 100% annual bonus plus 100% Long Term
Incentive Plan). This can be increased to 300% in exceptional
circumstances (i.e. 100% annual bonus plus 200% Long Term
Incentive Plan). These limits are in addition to the value of any
buy-out arrangements which are governed by the policy above.
In the case of an internal appointment, any variable pay element
awarded in respect of the prior role would be allowed to pay out
according to its terms, adjusted as relevant to take into account
the appointment. In addition, any other previously awarded
entitlements would continue, and be disclosed in the next
Annual Report on remuneration.
Base salary and relocation expenses
The Committee has the flexibility to set the salary of a new
appointment at a discount to the market level initially, with a series
of planned increases implemented over the following few years
to bring the salary to the appropriate market position, subject to
individual performance in the role.
For external and internal appointments, the Committee may
agree that the Group will meet certain relocation expenses
as appropriate.
Appointment of Non-Executive Directors
For the appointment of a new Chairman or Non-Executive
Director, the fee arrangement would be set in accordance with the
approved remuneration policy in force at that time.
Directors’ terms of employment and loss of office
The Group’s current policy is not to enter into employment
contracts with any element of notice period in excess of one
year. All Non-Executives are appointed for terms of 12 months
and stand for re-election annually at the Company’s AGM. Copies
of Executive Directors’ service contracts and Non-Executive
Directors’ letters of appointment are available for inspection at the
Company’s registered office during normal hours of business.
Remuneration Committee discretions
The Committee will operate the annual bonus plan and LTIP
according to their respective rules. To ensure the efficient
operation and administration of these plans, the Committee retains
discretion in relation to a number of areas. This is consistent with
market practice and these include (but are not limited to)
the following:
•
•
•
the participants;
the timing of grant and/or payment;
the size of grants and/or payments (within the limits set out in
the Policy table);
the determination of vesting based on the assessment
of performance;
the determination of a ‘good leaver’ and where relevant the
extent of vesting in the case of the share-based plans;
treatment in exceptional circumstances such as a change
of control;
•
•
•
• making the appropriate adjustments required in certain
circumstances (e.g. rights issues, corporate restructuring events,
variation of capital and special dividends);
• cash settling awards; and
•
the annual review of performance measures, weightings and
setting targets for the discretionary incentive plans from year
to year.
The Committee also retains the ability to adjust existing
performance conditions for exceptional events so that they can
still fulfil their original purpose. Any varied performance condition
would not be materially less difficult to satisfy in the circumstances.
Performance measures and targets
Our Group strategy and business objectives are the primary
consideration when we are selecting performance measures for
incentive plans. The annual bonus is based on performance against
a stretching combination of financial and non-financial measures.
Profit before tax reflects the Group’s strategic objective to increase
profit. In addition, Executive Directors are assessed on strategic
objectives as agreed by the Committee at the beginning of the
year. The LTIP is assessed against growth in adjusted Earnings Per
Share as it rewards improvement in the Group’s underlying financial
performance and is a measure of the Group’s overall financial
success and is visible to shareholders.
Targets within incentive plans that are related to internal financial
measures, such as profit, are typically determined based on our
budgets. The threshold and maximum levels of performance are
set to reflect minimum acceptable levels at threshold and very
stretching but achievable levels at maximum. At the end of each
performance period we review performance against the targets,
using judgement to account for items such as foreign exchange
rate movements, changes in accounting treatment, and significant
one-off transactions. The application of judgement is important
to ensure that final assessments of performance are fair and
appropriate. In addition, the Remuneration Committee reviews the
bonus and incentive plan results before any payments are made
to Executive Directors or any shares vest and has full discretion to
adjust the final payment or vesting downwards if they believe the
circumstances warrant it.
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Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Dates of service contracts and first appointment to the Board for all Directors are given opposite.
Date of service contract/
letter of appointment
Date first appointed/
to be appointed to the Board
Date stood/standing down
Executive Directors
Hugh Pelham
Neil Austin
Tim Davies
Non-Executive Directors
Peter Page
John Worby
Ian Wood
Alistair Wannop
Kristen Eshak Weldon
Chris Holmes
23 August 2020
1 January 2013
18 October 2012
1 September 2020
1 September 2020
1 September 2020
1 September 2020
26 July 2020
1 September 2019
4 January 2021
1 May 2013
1 March 2013
1 November 2019
1 April 2015
1 October 2015
1 September 2005
1 October 2020
7 January 1992
12 January 2021
7 January 2020
An Executive Director’s service contract may be terminated summarily
without notice and without any further payment or compensation,
except for sums accrued up to the date of termination, if they are
deemed to be guilty of gross misconduct or for any other material
breach of the obligations under their employment contract.
The Group has the right to terminate contracts by making a
payment in lieu of notice. Any such payment will typically reflect
the individual’s salary, benefits and pension entitlements. The
Group has the ability to mitigate costs and phase payments, if
alternative employment is obtained.
Estimates of total future potential remuneration from
2020 pay packages
The tables below provide estimates of the potential future
remuneration of each Executive Director based on the
remuneration opportunity granted in the 2020/2021 financial year.
Potential outcomes based on different scenarios are provided for
each Executive Director.
The assumptions underlying each scenario are described below.
Fixed
Consists of base salary, pension and other benefits.
There will be no automatic entitlement to a bonus if an Executive
Director has ceased employment or is under notice. However, the
Committee may at its discretion pay a prorated bonus in respect of
the proportion of the financial year worked. Such payment could be
payable in cash and not subject to deferral.
Any share-based entitlements granted to an Executive Director
under the Group’s share plans will be treated in accordance with
the relevant plan rules. Usually, any outstanding awards lapse
on cessation of employment. However, in certain prescribed
circumstances, such as death, ill-health, injury, disability,
redundancy, retirement with the consent of the Committee,
or any other circumstances at the discretion of the Committee,
‘good leaver’ status may be applied.
For good leavers under the LTIP, outstanding awards will vest at the
original vesting date to the extent that the performance condition
has been satisfied and be reduced on a pro rata basis to reflect the
period of time which has elapsed between the grant date and the
date on which the participant ceases to be employed by the Group.
For good leavers under the deferred bonus plan, unvested awards
will usually vest in full upon cessation.
In determining whether a departing Executive Director should be
treated as a ‘good leaver’, the Committee will take into account the
performance of the individual and Group over the whole period of
employment and the reasons for the individual’s departure.
In the event of a change of control resulting in termination of office,
the Executive Directors are entitled to 12 months’ base salary.
The Non-Executive Directors are not entitled to any compensation
for loss of office.
Base salaries are as at 1 September 20201.
Benefits are valued using the figures in the total
remuneration for the 2019 financial year table, adjusted
for any benefits that will not be provided during 2020.
Pensions are valued by applying the appropriate
percentage to the base salary.
Tim Davies
Neil Austin1
Hugh Pelham
Base
£’000
289
251
2252
Benefits
£’000
Pension
£’000
1
1
1
43
10
9
Total
£’000
333
262
235
On target Based on what a Director would receive if performance
was in line with plan and the threshold level was
achieved under the LTIP.
Maximum Assumes that the full stretch target for the LTIP are
achieved, and maximum performance is obtained
under both the financial and non-financial targets set
for the annual bonus scheme.
1 Neil Austin’s total potential remuneration for the 2020/21 financial year has been
adjusted to reflect the adjustment made from November 2020 as a consequence
of the salary review undertaken by the Committee in 2020.
2 The fixed remuneration for Hugh Pelham has been prorated to reflect that his
appointment commences from 4 January 2021. The full year equivalent would be
a base salary of £337,000, and total fixed remuneration of £351,000.
Carr's Group plc Annual Report and Accounts 2020
59
Governance
Remuneration Committee Report continued
Tim Davis
Chief Executive Officer
Total
74%
26%
£453,000
Annual Report on Remuneration
This part of the Directors’ Remuneration Report sets out a summary
of how the Directors’ Remuneration Policy was applied during the
2019/20 financial year.
Maximum with 50% share price appreciation
Maximum
On Target
Fixed
74%
26%
£453,000
85%
15%
£393,000
100% 0%
£333,000
0
100
200
300
400
500
Neil Austin
Chief Financial Officer
29%
28%
42%
£890,000
Maximum with 50% share price appreciation
34%
33%
33%
£764,000
Maximum
On Target
58%
28%
14%
£450,000
100% 0%
Fixed
£262,000
0
200
400
600
800
1000
Hugh Pelham
Chief Executive Officer (Designate)1
24%
23%
52%
£966,000
Maximum with 50% share price appreciation
29%
28%
42%
£797,000
Maximum
54% 26% 20%
On Target
100% 0%
Fixed
£431,000
£235,000
0
200
400
600
800
1000
1 Note that the fixed remuneration and annual bonus figures shown are
reflective of Hugh Pelham’s prorated annual base salary for the period
from 4 January 2021.
Salary and benefits
Annual bonus
LTIP
60
Carr's Group plc Annual Report and Accounts 2020
Remuneration Committee
During the 2019/20 year, the Remuneration Committee comprised
Ian Wood (Chair), John Worby, Alistair Wannop and Peter Page3. The
Committee met on 5 occasions during the year with all members in
attendance (see page 43).
The Executive Directors may attend meetings of the Remuneration
Committee by invitation and in an advisory capacity only. No person
attends any part of a meeting at which his or her own remuneration
is discussed. The Chairman and the Executive Directors determine
the remuneration of the other Non-Executive Directors.
During the year the Committee considered:
the Committee’s terms of reference;
•
the Corporate Governance Code and developing remuneration
•
trends, and their impact on the activities of the Committee and
remuneration policy;
the Directors’ Remuneration Policy;
levels of basic pay for Executive Directors, the Chairman and
senior management;
the remuneration package to be offered to the incoming
Chief Executive Officer Designate;
•
•
•
• performance targets, both financial and non-financial, for
Executive Director variable pay;
• pay and benefits structures across the broader Group (including
•
•
gender pay gap reporting and CEO pay ratios);
the outcome of bonus arrangements for Executive Directors
and senior management;
the award, and vesting, of long-term incentives for Executive
Directors and senior management;
• overall remuneration of Executive Directors; and
• shareholder feedback relating to changes being proposed to
the Directors’ Remuneration Policy.
3 Who became a member on 1 November 2019 upon his appointment to the Board.
Strategic Report
Governance
Financial Statements
2020 Remuneration (Audited Information)
In this section we summarise the pay packages awarded to our Executive Directors for performance in the 2020 financial year versus
2019. The table below shows all remuneration that was earned by each individual during the year and includes a single total remuneration
figure for the year.
Salary/fees
Benefits1
Pension
Total
fixed pay
Bonus
LTIP4
Total
variable pay
Total
remuneration
£’000
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Executive Directors
Tim Davies
Neil Austin
286
211
Non-Executive Directors
Chris Holmes2
Alistair Wannop
John Worby
Ian Wood
Peter Page3
29
40
40
40
75
280
207
82
39
39
39
N/A
1
1
—
—
—
—
—
1
1
43
32
43
31
330
244
324
239
43
38
—
—
—
—
N/A
—
—
—
—
—
—
—
—
—
N/A
29
40
40
40
75
82
39
39
39
N/A
—
—
—
—
—
169
131
—
—
—
—
N/A
135
98
271
200
178
136
440
331
508
380
764
570
—
—
—
—
—
—
—
—
—
N/A
—
—
—
—
—
—
—
—
—
N/A
29
40
40
40
75
82
39
39
39
N/A
1 Benefits consist of private medical insurance, death in service and income protection insurance.
2 Chris Holmes stood down from the Board on 7 January 2020.
3 Peter Page was appointed to the Board on 1 November 2019.
4 LTIP award values are calculated using the average share price over the final three months of the relevent financial year.
2020 Annual Bonus Payout
The annual bonus is calculated using a combination of financial and
strategic performance targets which are set with regard to Group
budget, historic performance, market outlook and future strategy.
80% of the bonus was based on Group adjusted profit before tax
(PBT). Adjusted PBT is calculated as reported PBT after adding back
or deducting any one-off items outside of normal trading that were
not anticipated at the time the performance targets were set, such
as acquisition related costs. The Group is committed to disclosing
its performance targets retrospectively save where this is prevented
due to commercial sensitivities. For the year ending 29 August 2020,
the PBT targets were set in accordance with the table below.
Threshold target (0%)
£’000
Basic target (30%)
£’000
Maximum target (80%)
£’000
17,616
18,543
19,470
Payments are adjusted on a straight-line basis between the targets
set out above. For the year ended 29 August 2020, adjusted PBT for
the Group was £14.9m. This performance was below the threshold
target and so nothing was payable to the Executive Directors in
connection with the Group’s financial targets.
Carr's Group plc Annual Report and Accounts 2020
61
Governance
Remuneration Committee Report continued
Strategic targets, which account for 20% of the bonus, were set at the start of the year. Details of certain targets, together with
performance against those targets, are provided in the tables below.
Tim Davies:
Objective
Performance measures
Performance outcome
a. Successful integration of
NW Total into the Group.
• Development of target business and
• Business developing in line with acquisition plan with
Engineering division in line with Board
strategy and acquisition plan.
increasingly diverse order book and opportunity pipeline
growth in line with the Board’s acquisition plan.
• Collaboration and joint working
between NW Total and other
Engineering businesses.
• Several collaborative initiatives already underway with
other Engineering division businesses in UK Service &
Manufacturing.
• Continuing growth of order book over
• Strong performance by business in first year as part of the
medium term.
Group.
b. Continued integration and
development of Animax
business.
• Delivery of first phase of bolus
manufacturing automation including
successful manufacture to required
standards.
• Growth in international sales
and progress with UK business
development strategy.
c. Identify and deliver
suitable acquisitions
which align to the Board’s
strategy.
• Develop pipeline of suitable
acquisition opportunities with a
targeted return which meets the
Board’s strategy.
• Boluses successfully manufactured using new automated
process. Testing to date shows good quality product which
meets required standards.
•
International sales growth has been slower than expected
owing to delay in securing product registrations and the
implementation of international business development
strategy.
• Seven acquisition profiles presented to the Board during the
year, with detailed work undertaken and presented to the
Board on three opportunities.
• Progression of opportunities delayed owing to COVID-19 but
• Detailed appraisal of acquisition
all potential projects remain under review.
opportunities, with plans presented
to the Board for consideration and/or
approval where appropriate.
d. Continued development
of global Agriculture
strategy.
• Development and presentation of
revised global Agriculture strategy.
•
Implementation of existing strategy
relating to Supplements including
focus on UK dairy and international
markets with demonstrable
year-on-year growth.
•
Implementation of restructuring of
UK Agriculture business.
• Significant year-on-year international Supplements growth
(New Zealand sales increased by 40%).
• Dairy Supplements launch taking place in December 2020
(COVID-19 delayed original planned launch).
• Development of strategy through consideration of markets,
customers and competitors, to facilitate transition to new
CEO in January 2021.
• UK Agriculture transformation plan presented to the Board
with implementation on track.
Neil Austin:
Objective
Performance measure
Comments on progress
a. Successful integration of
NW Total into the Group.
•
Integration of business operations
including financial reporting, IT,
internal and external audit, tax
compliance, banking and payroll.
• All integration work completed successfully, including the
on-boarding of staff into the Group’s defined contribution
pension scheme.
b. Successful continuation
of Group ERP project.
• ERP project progressing in line
• ERP go-live for targeted UK Supplements businesses took
with approved revised budget and
delivery timelines.
place successfully over the year, having been delayed from
March 2020 due to COVID-19.
• Regular progress reports delivered to
• UK Agriculture project underway and scheduled for go-live in
the Board.
May 2021.
• Successful go-live within two UK
• Revised scope and budget presented to the Board and
Supplements sites.
approved in August 2020.
• Progress with UK Agriculture
• Board regularly appraised and project head presented
business with go-live planned
for 2021.
detailed update to Board on 13 October.
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Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Objective
Performance measure
Comments on progress
a. Support CEO in
• Support development of pipeline of
developing and delivery
of acquisition pipeline.
suitable acquisition opportunities and
provide detailed appraisals to the
Board for consideration.
• Seven acquisition profiles presented to the Board during the
financial year, with detailed work undertaken and presented
to the Board on three opportunities.
• Progression of opportunities delayed owing to COVID-19 but
• Deploy structured process in
all potential projects remain under review.
• Post-investment appraisal devised, and appraisals presented
in relation to NuVision Engineering, Inc. and Animax Limited.
respect of:
a. acquisition identification;
b. deal evaluation;
c. due diligence; and
d. execution (if appropriate).
• Development of a post-investment
appraisal process for acquisitions.
e. Further develop financial
reporting.
• Develop Board reporting to further
improve understanding of current
performance and incorporate more
forward-looking information.
• More detailed commentary implemented during the year,
and reporting format improved to enable better visibility of
trading performance for each business. Further refinements
planned for FY21 following discussions with NEDs.
•
Inclusion of opportunity pipeline
information for Engineering
businesses.
•
Inclusion of latest year end forecasts.
• Opportunity pipeline has been developed ready for
implementation.
• Forecasting information included from March 2020 and
further detailed forecast information presented at
Board meetings.
• Extensive new COVID-19 cash flow reporting in place.
In addition to the above strategic performance indicators, the
Committee has a discretion to consider matters such as good
corporate governance which can include environmental, social and
governance considerations.
Long Term Incentive Plan awards during the year
(audited)
Long-term awards for 2020 were made to the Executive Directors
in line with the Directors’ Remuneration Policy.
Following the year end, the Committee reviewed overall outcomes
of the year and noted that good progress had been made towards
the non-financial targets. Noting the financial performance of
the Company, the Committee considered whether it would be
appropriate to exercise its discretion and withhold awarding any
payment to Executive Directors under the non-financial targets.
In making its judgement, the Committee took into account that
good strategic progress had been made, despite significant and
unprecedented external challenges, and also the exceptional
response by the Executive Directors to the COVID-19 pandemic,
which substantially mitigated its impact on the Company. In the
light of those considerations, the Committee determined that a
payment based upon achievement of the non-financial targets
was merited and awarded a bonus of 15% to Tim Davies and 18%
to Neil Austin.
Long Term Incentive Plan
The awards made to Executive Directors in 2017 were subject to
average annual adjusted EPS growth targets over the three-year
period ending on 29 August 2020 and from a base adjusted EPS
of 10.7p. Threshold vesting was set at 3% average annual growth.
The average EPS growth over the three-year period was 5.49% and,
accordingly, 51.64% of shares under the long-term awards made to
Executive Directors in 2017 vested.
Basis
on which
the award
was made
Face
value of
the award
(£’000)
Number
of shares
Threshold
vesting
End of
performance
period
Tim Davies
Neil Austin
199,810 100% of
salary
147,859 100% of
salary
286
25%
211
25%
August
2022
August
2022
The performance conditions which govern the vesting of those
shares are based on annual average growth in adjusted EPS
over a three-year period. The Committee regularly reviews
the performance measures it adopts to incentivise long-term
incentives and considers growth in adjusted EPS to be appropriate
because it directly measures the Group’s underlying financial
performance and is visible to shareholders.
Average annual growth %
% vesting
3
10
25
100
Nothing is payable below 3%, and a sliding scale operates between
this and the maximum available.
Carr's Group plc Annual Report and Accounts 2020
63
Governance
Remuneration Committee Report continued
All-employee share plans
The Executive Directors are also eligible to participate in the UK all-employee plans.
The Carr’s Group Sharesave Scheme 2016 is an HM Revenue & Customs (“HMRC”) approved scheme open to all staff permanently
employed in a UK Group company as of the eligibility date. Options under the plan are granted at a 20% discount to market value.
Executive Directors’ participation is included in the option table later in this report.
Total pension entitlements (audited)
The table below provides details of the Executive Directors’ pension benefits:
Tim Davies
Neil Austin
Normal
retirement age
67
67
Total contributions
to DC-type
pension plan
£’000
—
—
Cash in lieu
of contributions
to DC-type
pension plan
£’000
43
32
Each Executive Director has the right to participate in the Carr’s Group defined contribution pension plan or to elect to be paid some or all
of their contribution in cash. During the year, pension contributions and/or cash allowances in the year were capped at 15% of salary for
existing Executive Directors although contribution rates will be aligned with the majority of the UK workforce before the end of the current
financial year. Newly appointed Executive Directors will receive an employer pension contribution that does not exceed the rate received
by the majority of the UK workforce (currently 4% of base salary).
Payments to past Directors (audited)
No payments to past Directors have been made during the year.
Payments for loss of office (audited)
No payments for loss of office have been made to Directors during the year.
Directors’ interests in the shares of the Company (audited information)
A summary of interests in shares and scheme interests of the Directors who served during the year is given below.
Total number of
interests in shares
Vested LTIP
Unvested LTIP
SAYE (unvested
without performance
conditions)
Unvested deferred
bonus shares
% of salary
held in shares*
Executive Directors
Tim Davies
Neil Austin
Non-Executive Directors
Alistair Wannop
John Worby
Ian Wood
Peter Page
359,019
291,729
22,610
25,000
30,000
40,000
115,070
84,227
388,447
287,450
16,965
16,965
71,994
54,330
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
137%
178%
n/a
n/a
n/a
n/a
*Based upon the average average share price over the three months of the year ended 29 August 2020.
Performance shares (audited information)
The maximum number of outstanding shares that have been awarded to Directors under the LTIP are currently as follows:
Tim Davies
Neil Austin
2017/18 award
2018/19 award
2019/20 award
222,818
163,095
188,637
139,591
199,810
147,859
64
Carr's Group plc Annual Report and Accounts 2020
Assessing pay and performance
In the table below we summarise the Chief Executive’s single remuneration figure over the past five years, as well as how variable pay
plans have paid out in relation to the maximum opportunity. None of the remuneration shown is attributable to share price appreciation.
Strategic Report
Governance
Financial Statements
Single figure of total remuneration
Annual variable element (actual award
versus maximum opportunity)
Long-term incentive (vesting versus
maximum opportunity)
Ten-year historical TSR performance
500
2016
Tim Davies
2017
Tim Davies
2015
Tim Davies
911
100%
531
55%
100%
37.45%
2018
Tim Davies
861
2019
Tim Davies
764
100%
60.41%
2020
Tim Davies
508
15%
100%
100%
51.64%
308
0%
0%
450
400
350
300
250
200
150
100
50
0
Aug 10
Carr’s Group plc
FTSE All-Share Price Index
Source: Thomson datastream
Aug 11
Aug 12
Aug 13
Aug 14
Aug 15
Aug 16
Aug 17
Aug 18
Aug 19
Aug 20
Change in Chief Executive’s remuneration
In the table below we show the percentage change in the Directors’ remuneration between the 2019 and 2020 financial years compared
to the other employees.
Base pay/fees
Benefits
Annual bonus
Tim Davies
Neil Austin
Chris Holmes
John Worby
Ian Wood
Alistair Wannop
Other UK employees
2%
2%
2%
2%
2%
2%
2%
0%
0%
N/A
N/A
N/A
N/A
0%
-74.7%
-71.0%
N/A
N/A
N/A
N/A
-39.2%
Other UK employees
The Remuneration Committee considers pay across the entire Group when setting Executive Director remuneration. Annual consultations
take place across the Group between the Executive Directors, senior management and the Group Head of HR Group in relation
to employee pay. The outcome of that exercise, and any changes to employee pay levels, are considered when determining the
appropriateness to changes in Executive Director pay.
Chief Executive Officer pay ratio (unaudited)
The table below shows the pay ratio based on the total remuneration of the Chief Executive Officer to the 25th, 50th and 75th percentile
of all permanent UK employees of the Group.
Total pay (£’000)
Pay ratio
CEO pay
25th percentile
Median
75th percentile
2020
508
—
2019
763
—
2020
2019
2020
21
24
19
41
25
17
2019
25
31
2020
36
14
2019
34
22
The Group adopted Option A as defined in The Companies (Miscellaneous Reporting) Regulations 2018, as the calculation methodology
for the above ratios. The 25th, median and 75th percentile pay ratios were calculated using the full-time equivalent remuneration for all
UK employees as at 29 August 2020.
Carr's Group plc Annual Report and Accounts 2020
65
Governance
Remuneration Committee Report continued
Gender pay gap
Since 2017, the Company has reported the gender pay gap within
its largest subsidiary, Carrs Billington Agriculture (Sales) Limited.
Detailed information on the Carrs Billington gender pay gap can be
found on the company’s website at www.carrs-billington.com. This
year, the Committee also considered the gender pay gap across
the whole of the UK Group, which was as follows for the snapshot
period ending 5 April 2019:
Inflationary salary increases were awarded to the Executive
Directors effective 1 September 2020, of 1% which is consistent with
the broader workforce. A salary increase of 17.5% was also awarded
to Neil Austin with effect from 1 November 2020, following the
Executive Director benchmarking exercise undertaken by the
Committee after the year end as part of its CEO succession
planning exercise. Taking into account the alignment of pension
contributions, the overall increase in fixed remuneration payable to
Neil Austin amounts to 6.3%.
Difference between men and women
Hourly pay
Bonus
Mean
28%
63%
Proportion of people awarded a bonus
Men
Women
Median
25%
63%
Mean
48%
35%
Hugh Pelham will join the Board as CEO Designate on 4 January
2021 and will take over as CEO upon conclusion of the Company’s
AGM on 12 January 2021. Hugh will receive an annual base
salary of £337,000 per annum. This base salary is reflective of an
increase of 16.6% against the previous CEO base salary, although
a reduction in employer pension contributions means that overall
fixed remuneration is 5.4% higher. The Committee took advice from
remuneration consultants PwC in connection with the proposed
salary which was considered to be commensurate with
market levels.
External advisors
During the year, external advisers Aon plc (Aon) and
PricewaterhouseCoopers LLP (PwC) were engaged to advise the
Committee on remuneration issues, most notably in connection
with proposed changes to the Directors’ Remuneration Policy
and on the remuneration offered to the incoming Chief Executive
Officer Designate. Both Aon and PwC are a signatories to the
Remuneration Consultants’ Code of Conduct, which requires that
its advice be objective and impartial. The Company switched from
Aon to PwC due to the Committee’s primary adviser moving roles.
Total combined fees paid for the services provided amounted to
£14,000. PwC provides other services to the Company, in relation
to accounting. The Committee is satisfied that no conflicts of
interest in respect of advice provided to the Committee exist. It
is also satisfied that the members of Aon and PwC teams do not
have connections with the Company which might impair their
independence.
2020 AGM
At our AGM in January 2020, the Committee’s Annual Report on
Remuneration received a 99.6% proxy vote from shareholders in
favour (47,277,997 votes), with 0.3% against (143,909 votes) and 0.1%
withheld (47,175). The previous Directors’ Remuneration Policy,
which was approved at our AGM in January 2018, received a 99.7%
proxy vote from shareholders in favour (48,274,652 votes), with 0.2%
against (138,890 votes) and 0.1% withheld (74,059 votes).
By order of the Board
Ian Wood
Chair of the Remuneration Committee
23 November 2020
Percentage of men/women in each pay quartiles
Men
Women
Lowest
51%
49%
Q2
67%
33%
Q3
Highest
80%
20%
86%
14%
Relative spend on pay
The table shows the relative importance of spend on pay
compared to distributions to shareholders.
Employee costs
Dividends paid to shareholders
52,890
3,344
48,397
4,173
2020
£’000
2019
£’000
% change
9.3
-19.9*
*The reduction shown in dividends paid in the year is due to the deferral of the interim
dividend announced on 15 April 2020. That interim dividend was reinstated and declared
on 15 July 2020 (and paid following the year end on 2 October 2020). The total dividends
declared in respect of the year ended 29 August 2020 remains unchanged from the
prior year.
External appointments
The Executive Directors did not receive any remuneration in
respect of any external appointments in 2019/20.
Implementation of the policy in 2020/21
For 2020/21, the maximum annual bonus for the Executive Directors’
will remain 100% of salary. 25% of any bonus will be deferred for two
years in the form of shares. Performance will be assessed against
stretching targets which will be 80% financial and 20% strategic.
Financial targets will be based upon adjusted PBT for the Group
only and will not have any divisional splits. All annual bonus targets
will vest at thresholds of 0%. Due to commercial sensitivity, targets
will be disclosed respectively in next year’s report.
The Committee intends to grant LTIP awards of 100% of salary to
Neil Austin and, upon him joining the Board, Hugh Pelham, with
future vesting conditional upon stretching targets based upon an
adjusted EPS growth measure. Awards will vest at a threshold of
25% for average growth of 3% per annum and will rise on a straight-
line basis to the maximum 100% for average growth of 10% per
annum during the performance period.
66
Carr's Group plc Annual Report and Accounts 2020
Directors’ Report
The Directors submit their report and the audited
accounts of the Company for the year ended 29
August 2020.
The Company is a public limited company incorporated and
domiciled in England and Wales whose shares are listed and
traded on the London Stock Exchange. The address of its
registered office is Old Croft, Stanwix, Carlisle, CA3 9BA.
Results and dividends
A review of the results can be found on pages 18 to 19.
Interim dividend
Final dividend per share proposed
2020
2019
2.25p
2.50p
2.25p1
2.50p
1
In aggregate comprising a first interim dividend of 1.125 pence per share paid
on 31 May 2019 and a second interim dividend of 1.125 pence per share paid on
4 October 2019.
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 15 January 2021 to members on the
register at the close of business on 4 December 2020. Shares will
become ex-dividend on 3 December 2020.
The Group profit from continuing activities before taxation was
£12.5m (2019: £16.3 m. After taxation charge of £1.6 m (2019: £2.7 m),
the profit for the year is £10.9 m (2019: £13.6 m).
Pensions
Estimates of the amount and timing of future funding obligations
for the Group’s pension plans are based on various assumptions
including, among other things, the actual and projected market
performance of the pension plan assets, future long-term
corporate bond yields, longevity of members and statutory
requirements.
The Group continually reviews this risk and takes action to mitigate
where possible. In addition, while the Group is consulted by the
trustees on the investment strategies of its pension plans, the
Group has no direct control over these matters as the trustees are
directly responsible for the strategy.
Details of the Group’s pension plans are in note 28 of the financial
statements.
Employment policies and employees
The Company is committed to its employees and further details
on the Company’s policies and commitment can be found in the
Corporate Responsibility Report on pages 32 to 35.
Environment
The Company’s report on sustainability and the environment,
including its carbon footprint, is on page 34.
Strategic Report
Governance
Financial Statements
Political and charitable donations
During the year ended 29 August 2020 the Group contributed £81,000
(2019: £41,000) in the UK for charitable purposes. Further details
have been included with the Corporate Responsibility Statement
on pages 34 to 35. There were no political donations during the year
(2019: £nil).
Share capital
The Company has a single class of share capital which is divided into
Ordinary Shares of £0.025 each. The movement in the share capital
during the year is detailed in note 29 to the financial statements.
At the last Annual General Meeting the Directors received authority
from the shareholders to:
• Allot Shares – this gives Directors the authority to allot shares
and maintains the flexibility in respect of the Company’s
financing arrangements. The nominal value of Ordinary Shares
which the Directors may allot in the period up to the next Annual
General Meeting to be held on 12 January 2021, is limited to
£762,346.30 which is approximately 33% of the nominal value of
the issued share capital on 21 November 2019. The Directors do
not have any present intention of exercising this authority other
than in connection with the issue of Ordinary Shares in respect
of the Company’s share option plans. This authority will expire
at the end of the Annual General Meeting to be held on
12 January 2021.
• Disapplication of rights of pre-emption – this disapplies rights
of pre-emption on the allotment of shares by the Company
and the sale by the Company of treasury shares. The authority
will allow the Directors to allot equity securities for cash
pursuant to the authority to allot shares mentioned above, and
to sell treasury shares for cash without a pre-emptive offer to
existing shareholders, up to an aggregate nominal amount of
£115,507.00, representing approximately 5% of the Company’s
issued share capital as at 21 November 2019. This authority will
expire at the end of the Annual General Meeting to be held on
12 January 2021.
• To buy own shares – this authority allows the Company to buy
its own shares in the market, as permitted under the Articles of
Association of the Company, up to a limit of 9,240,560 Ordinary
Shares being approximately 10% of the Company’s issued
share capital at 21 November 2019. The price to be paid for any
share must not be less than £0.025, being the nominal value
of a share, and must not exceed 105% of the average middle
market quotations for the Ordinary Shares of the Company as
derived from the London Stock Exchange Daily Official List
for the five business days immediately preceding the day on
which the Ordinary Shares are purchased. The Directors have
no immediate plans to exercise the powers of the Company
to purchase its own shares and undertaken that the authority
would only be exercised if the Directors were satisfied that
a purchase would result in an increase in expected earnings
per share and was in the best interests of the Company at
the time. This authority will expire at the end of the Annual
General Meeting to be held on 12 January 2021. The Directors
would consider holding any of its own shares that it purchases
pursuant to this authority as treasury shares.
Carr's Group plc Annual Report and Accounts 2020
67
Governance
Directors’ Report continued
The interests of the Directors, as defined by the Companies Act
2006, in the Ordinary Shares of the Company, other than in respect
of options to acquire Ordinary Shares (which are detailed in the
analysis of options included in the Directors’ Remuneration Report
on pages 60 to 66), are as follows:
T J Davies
N Austin
P W B Page
A G M Wannop
J G Worby
I Wood
At 29 August 2020
Ordinary Shares
At 31 August 2019
Ordinary Shares
359,019
291,729
40,000
22,610
25,000
30,000
245,929
202,054
0
22,610
25,000
10,000
All the above interests are beneficial. There have been no other
changes to the above interests in the period from 29 August 2020
to 23 November 2020.
Rights and obligations attaching to shares
In a general meeting of the Company, subject to the provisions of
the Articles of Association and to any special rights or restrictions
as to voting attached to any class of shares in the Company (of
which there are none), the holders of the Ordinary Shares are
entitled to one vote in a poll for every Ordinary Share held. No
member shall be entitled to vote at any general meeting or class
meeting in respect of any shares held if any call or other sum
then payable in respect of that share remains unpaid. Currently all
issued shares are fully paid.
Change of control
There are a number of significant agreements across the Group
with provisions that take effect, alter or terminate upon a change
of control of the Company, such as bank facility agreements,
agreements with strategic partners (including joint venture
agreements), employee share scheme rules and certain project
contracts within the Engineering division. The Directors are not
aware of any agreements between the Company and its Directors
or employees that provide for compensation for loss of office or
employment that occurs solely because of a change of control.
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Statement of Directors’ responsibilities in respect of the
Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and
the Group and Parent Company financial statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Group and Parent
Company financial statements for each financial year. Under that
law they are required to prepare the Group financial statements
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU) and
applicable law and have elected to prepare the Parent Company
financial statements on the same basis.
Full details of the deadlines for exercising voting rights in respect
of the resolutions to be considered at the Annual General Meeting
to be held on 12 January 2021 will be set out in the Notice of Annual
General Meeting.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that period.
Subject to the provisions of the Companies Act 2006, the Company
may, by ordinary resolution, declare a dividend to be paid to the
members, but no dividend shall exceed the amount recommended
by the Board. The Board may pay interim dividends, and also
any fixed rate dividend, whenever the financial position of the
Company, in the opinion of the Board, justifies its payment. All
dividends shall be apportioned and paid pro rata according to the
amounts paid up on the shares.
Major shareholders
The Company has been informed of the following interests at 23
November 2020 in the 92,465,833 Ordinary Shares of the Company,
as required by the Companies Act 2006:
Number of
shares
% of issued
share capital
Heygate and Sons Limited
BBHISL Nominees Limited (130227)
Nortrust Nominees Limited (BAEMNL)
Chase Nominees Limited (ELUCIT)
Rathbone Nominees Limited
12,652,870
4,270,000
3,973,519
3,701,254
2,646,797
13.68
4.62
4.30
4.00
2.86
In preparing each of the Group and Parent Company financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable, relevant
and reliable;
• state whether they have been prepared in accordance with
IFRSs as adopted by the EU;
• assess the Group and Parent Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the Parent Company or to cease
operations.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Parent Company and enable them to ensure
that its financial statements comply with the Companies Act 2006.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error, and
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
68
Carr's Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that complies with that law and those regulations. The
Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company’s
website. Legislation in the UK governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
Directors’ statement as to disclosure of information
to auditors
The Directors who were members of the Board at the time of
approving the Directors’ Report are listed on pages 38 to 39. Having
made enquiries of fellow Directors, each of the Directors at the
date of this report confirms that:
•
they are not aware of any relevant audit information of which the
Company’s auditors are unaware; and
they have taken all the steps that they ought to have taken as a
Director in order to make themself aware of any relevant audit
information and to establish that the Company’s auditors are
aware of that information.
•
Responsibility statement of the Directors in respect of
the annual financial report
Each of the Directors confirms that, to the best of their knowledge:
•
the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole; and
the Strategic Report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
•
Each of the Directors considers the Annual Report and Accounts,
taken as a whole, to be fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Group’s position and performance, business model and strategy.
By order of the Board
Matthew Ratcliffe
Company Secretary
23 November 2020
Carr's Group plc Annual Report and Accounts 2020
69
Independent Auditor's Report
To the members of Carr’s Group plc
1. Our opinion is unmodified
We have audited the financial statements of Carr’s Group plc (“the Company”) for the year ended 29 August 2020 which comprise the
Consolidated Income Statement, Consolidated and Company Statements of Comprehensive Income, Consolidated and Company
Balance Sheets, Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity, Consolidated and Company
Statements of Cash Flows, and the related notes, including the Principal Accounting Policies.
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 29 August
2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as
applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
•
•
•
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate
basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were first appointed as auditor by the shareholders on 8 January 2019. The period of total uninterrupted engagement is for the two
financial years ended 29 August 2020. We have fulfilled our ethical responsibilities under, and we remain independent of, the Group in
accordance with UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit
services prohibited by that standard were provided.
Materiality:
Group financial statements
as a whole
£1,500,000 (2019: £850,000)
0.4% of Group revenue (2019: 4.9% of Group profit before tax before certain
adjusting items)
Coverage
93% (2019: 92%) of Group profit before tax
Key audit matters
Recurring risks
The impact of uncertainties due to the UK exiting the European Union on our audit
Going concern
Contract risk in Engineering on over time contracts
Parent Company: Valuation of Carr’s Group defined benefit pension obligation
New: Provision for trade receivables
vs 2019
70
Carr’s Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,
including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. We summarise below the key audit matters, in arriving at our audit opinion above, together with our
key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These
matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit
of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do
not provide a separate opinion on these matters.
The risk
Our response
The impact of uncertainties
due to the UK exiting the
European Union on our
audit
Refer to page 29 (principal
risks), page 31 (viability
statement), page 50 (Audit
Committee Report).
Unprecedented levels of uncertainty
All audits assess and challenge the
reasonableness of estimates, in particular
as described in the Going concern, Contract
risk in Engineering on over time contracts,
Valuation of Carr’s Group defined benefit
pension obligation (Parent Company) and
Provision for trade receivables key audit
matters below, and related disclosures, and
the appropriateness of the going concern
basis of preparation of the financial
statements (see below). All of these depend
on assessments of the future economic
environment and the Group’s future prospects
and performance.
In addition, we are required to consider the
other information presented in the Annual
Report including the principal risks disclosure
and the viability statement and to consider the
Directors’ statement that the Annual Report
and financial statements taken as a whole is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Group’s position
and performance, business model and
strategy.
Brexit is one of the most significant economic
events for the UK and its effects are subject
to unprecedented levels of uncertainty of
consequences, with the full range of possible
effects unknown.
We developed a standardised firm-wide approach to the
consideration of the uncertainties arising from Brexit in
planning and performing our audits. Our procedures
included:
• Our Brexit knowledge – We considered the Directors’
assessment of Brexit-related sources of risk for the
Group’s business and financial resources compared
with our own understanding of the risks. We
considered the Directors’ plans to take action to
mitigate the risks.
• Sensitivity analysis – When addressing the Going
concern, Contract risk in Engineering on over time
contracts, Valuation of Carr’s Group defined benefit
pension obligation (Parent Company) and Provision for
trade receivables key audit matters, and other areas
that depend on forecasts, we compared the Directors’
analysis to our assessment of the full range of
reasonably possible scenarios resulting from Brexit
uncertainty and, where forecast cash flows are
required to be discounted, considered adjustments to
discount rates for the level of remaining uncertainty.
• Assessing transparency – As well as assessing
individual disclosures as part of our procedures on
the Going concern, Contract risk in Engineering on
over time contracts, Valuation of Carr’s Group defined
benefit pension obligation (Parent Company) and
Provision for trade receivables key audit matters,
we considered all of the Brexit related disclosures
together, including those in the Strategic Report,
comparing the overall picture against our
understanding of the risks.
Our results – As reported under the Going concern,
Contract risk in Engineering on over time contracts,
Valuation of Carr’s Group defined benefit pension
obligation (Parent Company) and Provision for trade
receivables key audit matters, we found the resulting
estimates and related disclosures, and disclosures
in relation to going concern to be acceptable.
However, no audit should be expected to predict the
unknowable factors or all possible future implications
for a company and this is particularly the case in
relation to Brexit.
Carr’s Group plc Annual Report and Accounts 2020
71
Independent Auditor's Report continued
To the members of Carr’s Group plc
Going concern
Disclosure quality
Our procedures included:
The risk
Our response
Refer to page 31 (viability
statement), page 51 (Audit
Committee Report) and
page 85 (accounting policy).
The financial statements explain how the
Board has formed a judgement that it is
appropriate to adopt the going concern basis
of preparation for the Group and Parent
Company.
That judgement is based on an evaluation of
the inherent risks to the Group’s and
Company’s business model and how those
risks might affect the Group’s and Company’s
financial resources or ability to continue
operations over a period of at least a year from
the date of approval of the financial
statements.
The risks most likely to adversely affect the
Group’s and Company’s available financial
resources over this period were:
• The impact of COVID-19 on the economy
as a whole;
• Benchmarking assumptions – We assessed the
Group’s forecast models to identify and challenge
the key underlying inputs and assumptions,
comparing the Group’s assumptions used in the
cash flow projections to externally derived data.
• Funding assessment – We assessed the current
and available committed facilities to understand the
financial resources available to the Group during
the forecast period from the balance sheet date
and considered any related covenant requirements
and the evidence available regarding whether they
will be met.
• Historical comparisons – We assessed historical
forecasting accuracy by comparing forecast cash
flows to those actually achieved by the Group.
• Sensitivity analysis – We considered sensitivities
over the level of available financial resources
indicated by the Group’s financial forecasts taking
account of reasonably possible (but not unrealistic)
adverse effects that could arise from these risks
individually and collectively.
• The impact of Brexit on the Group’s
• Evaluating Directors’ intent – We evaluated the
Agriculture customer base in the United
Kingdom linked to continued uncertainty
over the nature of any future trade
agreements and agricultural subsidies; and
intent of the Directors and the potential mitigating
actions within their control that they would take to
improve the position should certain risks
materialise.
• The potential impacts of Brexit on the
• Assessing transparency – We assessed the
Group’s supply chain.
There are also less predictable but realistic
second order impacts, such as the potential
impact of COVID-19 and Brexit in eroding
customer or supplier confidence, which could
result in a rapid reduction of available financial
resources.
The risk for our audit was whether or not those
risks were such that they amounted to a
material uncertainty that may have cast
significant doubt about the ability to continue
as a going concern. Had they been such, then
that fact would have been required to have
been disclosed.
completeness and accuracy of the going concern
disclosures in the financial statements with
reference to our challenge of the Directors’ going
concern assessment and considered whether they
reflected the risks most likely to adversely affect
the Group’s and Company’s available financial
resources over the forecast period, and the risks
associated with the Group‘s ability to continue as
a going concern.
Our results – We found the going concern disclosure
without any material uncertainty to be acceptable
(2019 result: acceptable).
72
Carr’s Group plc Annual Report and Accounts 2020
Contract risk in Engineering
on over time contracts
Contract revenue over time
(£34.8m; 2019: £27.8m)
Refer to page 50 (Audit
Committee Report), pages
86 to 87 and 94 (accounting
policy) and pages 97 and 114
to 115 (financial disclosures).
Strategic Report
Governance
Financial Statements
The risk
Our response
Subjective estimate
Our procedures included:
For a significant proportion of its contracts in
the Engineering division, the Group recognises
revenue and profit over time. Depending on
the nature of the performance obligation, the
Group measures progress based either on the
input method (by considering the proportion
of contract costs incurred relative to the
estimated total forecast costs at completion),
or the output basis (with reference to certified
contract works).
The recognition of contract revenue and
profit over time for performance obligations
measured on the input basis is dependent
upon estimates in relation to the forecast total
costs of each performance obligation, which
inform the percentage of completion
calculation.
The recognition of contract revenue and
profit over time for performance obligations
measured on both the input and the output
basis is dependent upon estimates in relation
to forecast total revenues, including
assessment of contract revenue variations,
which should be recognised only when
evidence supports the conclusion that it is
highly probable that a significant reversal of
revenue recognised will not occur.
•
The effect of these matters is that, as part of
our risk assessment, we determined that
contract revenue, profit recognition and the
recoverability of contract assets involve a
high degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole.
Contracts were selected for substantive audit procedures
based on quantitative factors, such as financial
significance and stage of completion, and qualitative
factors, such as contracts under increased management
scrutiny, that we considered to be indicative of risk. Our
procedures for the contracts selected included:
• Contract documentation – We inspected the
contract documents and challenged the
identification of performance obligations and the
method of revenue recognition in accordance with
IFRS 15.
• Contract clauses scrutiny – Our inspection of
contract documents included a search for unusual
contract clauses or contractual mechanisms and
we assessed how these were reflected in the
amounts recognised in the financial statements.
• Challenge key judgements – We obtained the
detailed project review papers and challenged the
Group’s estimates and judgements in respect of
contract forecasts, variations, and the recoverability
of contract assets via agreement to third-party
certifications and confirmations, challenge of senior
operational, commercial and financial management,
and with reference to our own expertise. We also
performed corroborative enquiries of the Group’s
in-house legal counsel.
Independent re-performance – We recalculated
progress towards satisfaction of performance
obligations to assess the expected revenue and
profit recognition and compared this to the
amounts recorded.
• Tests of detail – We inspected correspondence
with customers and third parties, including in
instances where contract variations have arisen,
to challenge the revenue and costs recorded.
• Remote inspection – For contracts measured
on the input basis in the UK Engineering business,
we performed remote inspections, physically
inspecting the job progress around the year-end
point, and challenging the stage of completion and
forecast costs to complete through observation
and discussion with key personnel.
• Cost allocation – We challenged the accuracy of
contract cost allocation through vouching costs to
source documentation and confirming that those
costs related to the stated contract, reviewing
certain controls including timesheet authorisation.
• Assessing transparency – We considered the
adequacy of the Group’s contract-related
disclosures, including those in respect of estimates
and judgements relating to contract revenues and
profit recognition.
Our results – We found the revenue and profit margin
recognised on over time contracts to be acceptable (2019
result: acceptable).
Carr’s Group plc Annual Report and Accounts 2020
73
Independent Auditor's Report continued
To the members of Carr’s Group plc
Provision for trade
receivables
Trade receivables
(£49.1m; 2019: £51.4m)
Provision
(£1.9m; 2019: £1.3m)
Refer to page 50 (Audit
Committee Report),
page 94 (accounting policy)
and pages 115 to 116
(financial disclosures).
Parent Company: Valuation
of Carr's Group Pension
Scheme defined benefit
pension obligation
(£65.8m; 2019: £68.0m)
Refer to page 50 (Audit
Committee Report), pages
87 and 94 (accounting
policy) and pages 124 to 129
(financial disclosures).
The risk
Our response
Subjective estimate
Our procedures included:
There are material amounts of trade
receivables within the Agriculture division,
where historically there has been a slower
collection pattern and for which financial
stress may have increased during the year
due to the impacts of COVID-19 and Brexit
(see above).
The effect of these matters is that, as part of
our risk assessment, we determined that the
provision for trade receivables has a high
degree of estimation uncertainty, with a
potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole.
• Assessing assumptions – We assessed the
Directors’ assumptions behind the provision against
trade receivables, and tested the accuracy of the
ageing calculations in order to recalculate
management’s provision.
• Historical comparisons – We assessed historical
receivable collection patterns in the Agriculture
division and compared these to current trends.
• Tests of detail – We assessed the amount of cash
received against trade receivables at year-end,
investigating significant, overdue amounts where
cash has not been received and for which no
provision has been recognised.
• Assessing transparency – Assessing the adequacy
of the Group’s disclosures about the degree of
estimation involved in arriving at the provision.
Our results – We found the provision for trade
receivables to be acceptable.
Subjective valuation
Our procedures included:
• Benchmarking assumptions – We challenged the
key actuarial assumptions applied (discount rate,
inflation rate and mortality rate) in estimating the
defined benefit obligation with the support of our
own pension specialists, including a comparison of
the principal assumptions against market data.
• Sensitivity analysis – We assessed the sensitivity
of the defined benefit obligation to changes in
certain key actuarial assumptions.
• Assessment of experts – We assessed the
competence, capabilities and objectivity of the
external actuary engaged by the Company.
• Assessing transparency – We considered the
adequacy of the Company’s disclosures in respect
of the sensitivity of the obligation to changes in key
assumptions.
Our results – We found the valuation of the Carr’s Group
Pension Scheme defined benefit pension obligation to be
acceptable (2019 result: acceptable).
The Company operates a defined benefit
pension scheme, the Carr’s Group Pension
Scheme. The defined benefit obligation in
respect of this scheme is material in the context
of the overall balance sheet of the Company.
Significant estimates in respect of key
actuarial assumptions including the discount
rate, inflation rate and mortality rate, are made
in valuing the Company’s defined benefit
obligation (before deducting the scheme’s
assets). The scheme is closed to future
accrual, but small changes in the assumptions
and estimates would have a material impact
on the financial position of the Company. The
Company engages external actuarial
specialists to assist in selecting appropriate
assumptions and to calculate the obligation.
The effect of these matters is that, as part of
our risk assessment, we determined that the
valuation of the Carr’s Group Pension Scheme
defined benefit obligation has a high degree
of estimation uncertainty, with a potential
range of reasonable outcomes greater than
our materiality for the Company’s financial
statements as a whole, and possibly many
times that amount. The financial statements
(note 28) disclose the sensitivities estimated
by the Company.
The acquisitions of Animax and NW Total Engineered Solutions took place in the previous financial year. While there are aspects of the
acquisition accounting which are subject to audit procedures in the current year, we have not assessed this as a significant risk in our
current year audit. We also continue to perform procedures over the valuation of certain Carr's Group defined benefit pension scheme
assets in relation to the Parent Company. However, the assets held are subject to lower estimation uncertainty than in the previous
financial year and therefore we have not assessed this as one of the most significant risks in our current year audit. Therefore, these
items are not separately identified in our report this year.
74
Carr’s Group plc Annual Report and Accounts 2020
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the Group financial statements as a whole was set at
£1,500,000, determined with reference to a benchmark of revenue
of which it represents 0.4% (2019: 4.9% of Group profit before tax,
normalised to exclude certain of the year’s adjusting items as
disclosed in note 5, of £17.2m). Our benchmark has changed because
we consider revenue to be the most appropriate benchmark as it
provides a more stable measure year on year than Group profit
before tax, and is reflective of the size and complexity of the Group.
Materiality for the Parent Company financial statements as a whole
was set at £600,000 (2019: £350,000), determined with reference to a
benchmark of Company total assets, of which it represents 0.7%
(2019: 0.4%).
Strategic Report
Governance
Financial Statements
Group revenue
£395.6m
(2019: £403.9m)
Group materiality
£1,500,000
(2019: £850,000)
£1,500,000
Whole financial
statements materiality
(2019: £850,000)
£900,000
Range of materiality
at 11 components
£110,000 to £900,000
(2019: £100,000 to
£620,000)
£52,500
Misstatements reported
to the Audit Committee
(2019: £42,500)
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £52,500, in addition
to other identified misstatements that warranted reporting on
qualitative grounds.
Revenue
Group materiality
Group revenue
Group profit before tax
2 7
8
93%
(2019: 92%)
92
91
2
1.5 0.5
100%
(2019: 98%)
98
98
Group total assets
3 1
13
3
99%
(2019: 87%)
84
96
Full scope for Group audit purpose 2020
Specified risk-focused audit procedures 2020
Full scope for Group audit purposes 2019
Specified risk-focused audit procedures 2019
Residual components
Of the Group’s 53 (2019: 52 reporting components), we subjected
nine (2019: eight) to full scope audits for Group purposes and two
(2019: two) to specified risk-focused audit procedures. The latter
were not individually financially significant enough to require a full
scope audit for Group purposes, but did present specific individual
risks that needed to be addressed. We conducted reviews of
financial information (including enquiry) at these non-significant
components to re-examine our assessment that there were no
significant risks of material misstatement.
The components within the scope of our work accounted for the
percentages illustrated opposite.
The remaining 7% of Group profit before tax and 1% of total Group
assets is represented by 14 reporting components, none of which
individually represented more than 5% of any of total Group revenue,
Group profit before tax or total Group assets. For these residual
components, we performed analysis at an aggregated Group level
to re-examine our assessment that there were no significant risks of
material misstatement within these.
The Group team instructed component auditors as to the significant
areas to be covered, including the relevant risks detailed above and
the information to be reported back. The Group team approved the
component materialities, which ranged from £110,000 to £900,000,
having regard to the mix of size and risk profile of the Group across
the components. The work on two of the nine components (2019:
two of the eight components) was performed by component
auditors and the rest, including the audit of the Parent Company, was
performed by the Group team.
The Group team held video and telephone conference meetings
with the component auditors. At these meetings, the findings
reported to the Group team were discussed in more detail, and any
further work required by the Group team was then performed by the
component auditor.
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the going
concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that
the Company’s and the Group’s financial position means that this is
realistic. They have also concluded that there are no material
uncertainties that could have cast significant doubt over their ability
to continue as a going concern for at least a year from the date of
approval of the financial statements (“the going concern period”).
Carr’s Group plc Annual Report and Accounts 2020
75
Independent Auditor's Report continued
To the members of Carr’s Group plc
Our responsibility is to conclude on the appropriateness of the
Directors’ conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in this
Auditor's report is not a guarantee that the Group and the Company
will continue in operation.
•
•
•
We identified going concern as a key audit matter (see section 2 of
this report). Based on the work described in our response to that key
audit matter, we are required to report to you if:
• we have anything material to add or draw attention to in
relation to the Directors’ statement in the Principal Accounting
Policies in the financial statements on the use of the going
concern basis of accounting with no material uncertainties that
may cast significant doubt over the Group and Company’s use
of that basis for a period of at least 12 months from the date of
approval of the financial statements; or
the same statement is materially inconsistent with our audit
knowledge.
•
We have nothing to report in these respects.
5. We have nothing to report on the other information in
the Annual Report and Accounts
The Directors are responsible for the other information presented
in the Annual Report together with the financial statements. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance conclusion
thereon.
Our responsibility is to read the other information and, in doing so,
consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the
financial statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in the other
information.
Strategic Report and Directors’ Report
Based solely on our work on the other information:
• we have not identified material misstatements in the Strategic
•
•
Report and the Directors’ Report;
in our opinion the information given in those reports for the
financial year is consistent with the financial statements; and
in our opinion those reports have been prepared in accordance
with the Companies Act 2006.
Directors’ Remuneration Report
In our opinion the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with the
Companies Act 2006.
Disclosures of emerging and principal risks and longer-term
viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
76
Carr’s Group plc Annual Report and Accounts 2020
the Directors’ confirmation within the Viability Statement on
page 31 that they have carried out a robust assessment of the
emerging and principal risks facing the Group, including those
that would threaten its business model, future performance,
solvency and liquidity;
the Principal Risks disclosures describing these risks and
explaining how they are being managed and mitigated; and
the Directors’ explanation in the Viability Statement of how
they have assessed the prospects of the Group, over what
period they have done so and why they considered that period
to be appropriate, and their statement as to whether they have
a reasonable expectation that the Group will be able to
continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
Under the Listing Rules we are required to review the Viability
Statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the context of only
the knowledge acquired during our financial statements audit. As
we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the absence of
anything to report on these statements is not a guarantee as to the
Group’s and Company’s longer-term viability.
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit
and the Directors’ statement that they consider that the Annual
Report and financial statements taken as a whole is fair,
balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy; or
the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee; or
•
• a corporate governance statement has not been prepared by
the Company.
We are required to report to you if the Statement of Compliance with
the UK Corporate Governance Code does not properly disclose a
departure from the provisions of the UK Corporate Governance Code
specified by the Listing Rules for our review.
We have nothing to report in these respects.
Based solely on our work on the other information described above
• with respect to the Corporate Governance Statement
disclosures about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures:
• we have not identified material misstatements therein; and
•
the information therein is consistent with the financial
statements; and
•
in our opinion, the Corporate Governance Statement has been
prepared in accordance with relevant rules of the Disclosure
Guidance and Transparency Rules of the Financial Conduct
Authority.
Strategic Report
Governance
Financial Statements
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report to you if, in
our opinion:
• adequate accounting records have not been kept by the
•
Parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on pages 68 to 69,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error; assessing the Group
and Parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and using
the going concern basis of accounting unless they either intend to
liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or other irregularities (see below), or error, and
to issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud,
other irregularities or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the FRC’s
website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could reasonably be
expected to have a material effect on the financial statements from
our general commercial and sector experience, and through
discussion with the Directors and other management (as required by
auditing standards), and from inspection of the Group’s regulatory
and legal correspondence and discussed with the Directors and
other management the policies and procedures regarding
compliance with laws and regulations. We communicated identified
laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. This included
communication from the Group to component audit teams of
relevant laws and regulations identified at Group level.
The potential effect of these laws and regulations on the financial
statements varies considerably.
Firstly, the Group is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation), distributable
profits legislation and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
Secondly, the Group is subject to many other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an effect:
health and safety, anti-bribery, employment law, regulatory capital
and liquidity and certain aspects of company legislation recognising
the nature of the Group’s activities and its legal form. Auditing
standards limit the required audit procedures to identify non-
compliance with these laws and regulations to enquiry of the
Directors and other management and inspection of regulatory and
legal correspondence, if any. Through these procedures, we became
aware of actual or suspected non-compliance and considered the
effect as part of our procedures on the related financial statement
items. The identified actual or suspected non-compliance was not
sufficiently significant to our audit to result in our response being
identified as a key audit matter.
Owing to the inherent limitations of an audit, there is an unavoidable
risk that we may not have detected some material misstatements
in the financial statements, even though we have properly planned
and performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with laws and
regulations (irregularities) is from the events and transactions
reflected in the financial statements, the less likely the inherently
limited procedures required by auditing standards would identify
it. In addition, as with any audit, there remained a higher risk of
non-detection of irregularities, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the override
of internal controls. We are not responsible for preventing
non-compliance and cannot be expected to detect non-compliance
with all laws and regulations.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members, as
a body, for our audit work, for this report, or for the opinions we
have formed.
Nick Plumb
(Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
23 November 2020
Carr’s Group plc Annual Report and Accounts 2020
77
Consolidated Income Statement
For the year ended 29 August 2020
Continuing operations
Revenue
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Adjusted1 share of post-tax results of associate
Adjusting items
Share of post-tax results of associate
Share of post-tax results of joint ventures
Adjusted1 operating profit
Adjusting items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusting items
Profit before taxation
Taxation
Profit for the year
Profit attributable to:
Equity shareholders
Non-controlling interests
Earnings per ordinary share (pence)
Basic
Diluted
Adjusted1
Notes
2,3
2020
£’000
2019
£’000
395,630
(343,381)
403,905
(349,798)
52,249
(19,507)
(21,535)
54,107
(18,454)
(20,835)
5
2
5
2,4
7
7
2
5
2
8
10
10
10
1,191
–
1,191
1,442
16,247
(2,407)
13,840
313
(1,656)
14,904
(2,407)
12,497
(1,575)
1,230
(306)
924
1,453
18,930
(1,735)
17,195
463
(1,349)
18,044
(1,735)
16,309
(2,685)
10,922
13,624
9,533
1,389
10,922
10.3
10.2
11.9
12,049
1,575
13,624
13.1
12.8
14.6
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
disclosed in note 5. An alternative performance measures glossary can be found on pages 143 to 144.
78
Carr’s Group plc Annual Report and Accounts 2020
Consolidated and Company Statements
of Comprehensive Income
For the year ended 29 August 2020
Strategic Report
Governance
Financial Statements
Profit for the year
Other comprehensive (expense)/income
Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation (losses)/gains arising on translation of
overseas subsidiaries
Net investment hedges
Taxation credit/(charge) on net investment hedges
Items that will not be reclassified subsequently to profit or loss:
Actuarial gains/(losses) on retirement benefit asset:
– Group
– Share of associate
Taxation (charge)/credit on actuarial gains/(losses) on retirement
benefit asset:
– Group
– Share of associate
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Equity shareholders
Non-controlling interests
Notes
Group
2020
£’000
2019
£’000
10,922
13,624
Company
2020
£’000
6,739
2019
£’000
6,768
(2,552)
(54)
10
1,857
37
(7)
142
408
(1,845)
(88)
28
19
(27)
(96)
(2,169)
8,753
7,364
1,389
8,753
314
15
283
13,907
6,854
12,332
1,575
13,907
6,854
–
6,854
–
–
–
142
–
(27)
–
115
–
–
–
(1,845)
–
314
–
(1,531)
5,237
5,237
–
5,237
Carr’s Group plc Annual Report and Accounts 2020
79
Consolidated and Company Balance Sheets
As at 29 August 2020
(Company Number 00098221)
Notes
11
11
12
13
14
15,18
15,16
15,17
15
22
28
19
20
21
22
23
27
24
26
13
21
25
26
13
19
25
Group
2020
£’000
Company
2019
£’000
2020
£’000
2019
£’000
32,041
9,171
38,259
14,856
158
–
14,307
10,551
73
20
8,037
–
32,877
9,318
41,917
–
164
–
13,392
9,671
76
22
7,769
410
127,473
115,616
40,961
8,114
51,686
1,535
46,270
9,466
56,349
–
3
17,571
–
28,649
119,870
140,734
247,343
256,350
–
334
118
457
–
32,568
245
272
–
34,735
8,037
–
76,766
–
–
2,617
1,954
–
7,984
12,555
89,321
–
376
158
–
–
26,538
245
272
–
16,413
7,769
285
52,056
–
–
36,185
840
–
6,778
43,803
95,859
(11,420)
(2,778)
(1,061)
(55,522)
(33)
(23,856)
–
(1,269)
(62,653)
(1,010)
(2,450)
(97)
–
(1,660)
–
(7,806)
–
–
(2,533)
–
(70,814)
(88,788)
(4,207)
(10,339)
(25,021)
(11,171)
(4,783)
(1,385)
(28,586)
–
(4,987)
(2,999)
(22,947)
(354)
(1,365)
–
(26,846)
–
(1,321)
–
(42,360)
(36,572)
(24,666)
(28,167)
(113,174)
(125,360)
(28,873)
(38,506)
134,169
130,990
60,448
57,353
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investment in subsidiary undertakings
Investment in associate
Interest in joint ventures
Other investments
Financial assets
– Non-current receivables
Retirement benefit asset
Deferred tax assets
Current assets
Inventories
Contract assets
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Financial liabilities
– Borrowings
– Leases
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
– Leases
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
80
Carr’s Group plc Annual Report and Accounts 2020
Consolidated and Company Balance Sheets continued
As at 29 August 2020
(Company Number 00098221)
Strategic Report
Governance
Financial Statements
Shareholders’ equity
Share capital
Share premium
Other reserves
Retained earnings:
At the beginning of the year
Effect of IFRS 16 adoption
Profit attributable to the equity shareholders
Other changes in retained earnings
Total shareholders’ equity
Non-controlling interests
Total equity
Notes
29
Group
2020
£’000
2,312
9,176
4,436
94,864
(931)
9,533
(2,264)
101,202
117,126
17,043
Company
2019
£’000
2,299
9,165
7,922
87,843
–
12,049
(5,028)
94,864
114,250
16,740
2020
£’000
2,312
9,176
780
44,196
(7)
6,739
(2,748)
48,180
60,448
–
134,169
130,990
60,448
2019
£’000
2,299
9,165
1,693
42,623
–
6,768
(5,195)
44,196
57,353
–
57,353
The comparative year presented has not been restated for the adoption of IFRS 16.
The financial statements set out on pages 78 to 140 were approved by the Board on 23 November 2020 and signed on its behalf by:
Tim J Davies
Neil Austin
Carr’s Group plc Annual Report and Accounts 2020
81
Consolidated Statement of Changes in Equity
For the year ended 29 August 2020
Share
Capital
£’000
Share
Premium
£’000
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Foreign
Exchange
Reserve
£’000
Other
Reserve
£’000
Retained
Earnings
£’000
Total
Shareholders’
Equity
£’000
Non-
controlling
Interests
£’000
Total Equity
£’000
As at 2 September 2018
2,285
9,141
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Dividends paid
Equity-settled share-based
payment transactions
Allotment of shares
Purchase of own shares
held in trust
Reclassified from liabilities
Transfer
–
–
–
–
–
14
–
–
–
–
–
–
–
–
24
–
–
–
At 31 August 2019
2,299
9,165
As previously reported at
31 August 2019
Effect of IFRS 16 adoption
2,299
–
9,165
–
At 1 September 2019
(restated)1
Profit for the year
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Dividends paid
Equity-settled share-based
payment transactions
Excess deferred taxation on
share-based payments
Allotment of shares
Purchase of own shares
held in trust
Transfer
2,299
9,165
–
–
–
–
–
–
13
–
–
–
–
–
–
–
–
11
–
–
At 29 August 2020
2,312
9,176
–
–
–
–
–
–
–
(13)
–
13
–
–
–
–
–
–
–
–
–
–
–
(58)
13
(45)
1,427
4,259
202
87,843
105,157
15,685 120,842
–
–
–
–
53
–
–
97
–
–
1,887
1,887
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
12,049
12,049
1,575
13,624
(1,604)
283
–
283
10,445
(4,173)
12,332
(4,173)
1,575
(588)
13,907
(4,761)
759
–
–
–
(10)
812
38
(13)
97
–
68
–
–
–
–
880
38
(13)
97
–
1,577
6,146
199
94,864
114,250
16,740 130,990
1,577
–
6,146
–
199
–
94,864
(931)
114,250
(931)
16,740 130,990
(1,442)
(511)
1,577
6,146
199
93,933
113,319
16,229 129,548
–
–
–
–
–
(2,596)
(2,596)
–
(843)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
9,533
9,533
1,389
10,922
427
(2,169)
–
(2,169)
9,960
(3,344)
7,364
(3,344)
1,389
(588)
8,753
(3,932)
691
(152)
(27)
–
–
(11)
(27)
24
(58)
–
15
(2)
–
–
–
(137)
(29)
24
(58)
–
734
3,550
197
101,202
117,126
17,043 134,169
The equity compensation reserve reflects the cumulative accounting impact, at the balance sheet date, of the fair value of the share
schemes over the vesting periods. The movement on the equity compensation reserve is taken through the consolidated income
statement. During the year £691,000 (2019: £759,000) was transferred from the equity compensation reserve to retained earnings in
respect of options exercised in the year.
The Group has opted to use previous revaluations of property made under UK GAAP as deemed cost. On adoption of IFRS the
revaluation reserve was reclassified to other reserves.
1 Restated for the adoption of IFRS 16 (note 37).
82
Carr’s Group plc Annual Report and Accounts 2020
Company Statement of Changes in Equity
For the year ended 29 August 2020
Strategic Report
Governance
Financial Statements
At 2 September 2018
Profit for the year
Other comprehensive expense
Total comprehensive income
Dividends paid
Equity-settled share-based payment transactions
Excess deferred taxation on share-based payments
Allotment of shares
Purchase of own shares held in trust
Reclassified from liabilities
Transfer
At 31 August 2019
As previously reported at 31 August 2019
Effect of IFRS 16 adoption
At 1 September 2019 (restated)1
Profit for the year
Other comprehensive income
Total comprehensive income
Dividends paid
Equity-settled share-based payment transactions
Excess deferred taxation on share-based payments
Allotment of shares
Purchase of own shares held in trust
Transfer
Share
Capital
£’000
Share
Premium
£’000
2,285
9,141
–
–
–
–
–
–
14
–
–
–
–
–
–
–
–
–
24
–
–
–
2,299
2,299
–
2,299
9,165
9,165
–
9,165
–
–
–
–
–
–
13
–
–
–
–
–
–
–
–
11
–
–
At 29 August 2020
2,312
9,176
Treasury
Share
Reserve
£’000
Equity
Compensation
Reserve
£’000
Retained
Earnings
£’000
Total
Equity
£’000
–
–
–
–
–
–
–
–
(13)
–
13
–
–
–
–
–
–
–
–
–
–
–
(58)
13
(45)
1,537
42,623
55,586
–
–
–
–
59
–
–
–
97
–
1,693
1,693
–
1,693
–
–
–
–
(868)
–
–
–
–
6,768
(1,531)
5,237
(4,173)
520
2
–
–
–
(13)
6,768
(1,531)
5,237
(4,173)
579
2
38
(13)
97
–
44,196
57,353
44,196
(7)
57,353
(7)
44,189
57,346
6,739
115
6,854
(3,344)
519
(25)
–
–
(13)
6,739
115
6,854
(3,344)
(349)
(25)
24
(58)
–
825
48,180
60,448
The equity compensation reserve reflects the cumulative accounting impact, at the balance sheet date, of the fair value of the share
schemes over the vesting periods. The movement on the equity compensation reserve is taken through the income statement where
it relates to employees of the Company and to investment in subsidiaries where it relates to employees of the subsidiaries. During the
year £519,000 (2019: £520,000) was transferred from the equity compensation reserve to retained earnings and £212,000 (2019:
£301,000) was transferred from the equity compensation reserve to investment in subsidiaries in respect of options exercised in
the year.
1 Restated for the adoption of IFRS 16 (note 37).
Carr’s Group plc Annual Report and Accounts 2020
83
Consolidated and Company Statements
of Cash Flows
For the year ended 29 August 2020
Cash flows from operating activities
Cash generated from/(used in) continuing operations
Interest received
Interest paid
Tax (paid)/received
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Acquisition of subsidiaries (net of overdraft/cash acquired)
Contingent/deferred consideration paid
Dividends received from subsidiaries
Net receipt/(payment) of loans to subsidiaries
Dividend received from associate and joint ventures
Other loans
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of own shares held in trust
Notes
31
Group
2020
£’000
Company
2019
£’000
2020
£’000
2019
£’000
22,639
176
(1,696)
(3,059)
18,060
—
(2,659)
—
—
701
718
(1,459)
421
(6,569)
(58)
16,004
178
(1,276)
(2,306)
12,600
(9,868)
(379)
—
—
711
79
(1,310)
831
(4,471)
(13)
(2,520)
1,774
(729)
(571)
(2,046)
—
—
8,856
1,130
588
—
—
—
—
(58)
(2,587)
1,765
(547)
492
(877)
—
—
6,805
(12,623)
588
—
(89)
—
(46)
(13)
Net cash (used in)/generated from investing activities
(8,905)
(14,420)
10,516
(5,378)
Cash flows from financing activities
Proceeds from issue of ordinary share capital
New bank loans and movement on RCF
Lease principal repayments
Repayment of borrowings
Receipt of loans from subsidiaries
Decrease in other borrowings
Dividends paid to shareholders
Dividends paid to related party
Net cash (used in)/generated from financing activities
Effects of exchange rate changes
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
29
9
24
1,889
(3,171)
(2,459)
—
(14,508)
(3,344)
(588)
38
14,430
(1,278)
(2,493)
—
(1,352)
(4,173)
(588)
(22,157)
4,584
(989)
(13,991)
24,295
526
3,290
21,005
Cash and cash equivalents at end of the year
24
10,304
24,295
24
(1,500)
(114)
(2,400)
110
—
(3,344)
—
(7,224)
(40)
1,206
6,778
7,984
38
13,763
—
(1,613)
—
—
(4,173)
—
8,015
63
1,823
4,955
6,778
84
Carr’s Group plc Annual Report and Accounts 2020
Principal Accounting Policies
Strategic Report
Governance
Financial Statements
Basis of accounting
The consolidated and Company financial statements are prepared on a going concern basis in accordance with International Financial
Reporting Standards (“IFRSs”) and International Financial Reporting Standards Interpretation Committee (“IFRS IC”) interpretations
endorsed by the European Union (“EU”) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The Company is a public limited company incorporated and domiciled in England and Wales whose shares are listed and traded on
the London Stock Exchange. The address of its registered office is Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.
The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting year. Although these estimates are based on management’s best knowledge of the
amount, event or actions, actual results ultimately may differ materially from the estimates.
Accounting policies have been applied consistently, other than where new policies have been adopted.
The consolidated and Company financial statements are prepared under the historic cost convention as modified by the revaluation of
certain financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
The accounting policies for the Group and Company are detailed below:
Going concern
The financial statements have been prepared on a going concern basis which the Directors consider to be appropriate for the following
reasons.
The Directors have reviewed the Group’s operational forecasts and projections for the three years to 2 September 2023 as used for the
viability assessment, taking account of reasonably possible changes in trading performance, together with the planned capital
three-year statement over that same period. The Group is expected to have a sufficient level of financial resources available through
operating cash flows and existing bank facilities for a period of at least 12 months from approval of these financial statements (“The
going concern period”). The Group has operated within all its banking covenants throughout the year. In addition, the Group’s main
banking facility is in place until November 2023 and an invoice discounting facility has been recently renewed for a three-year period to
August 2023.
For the purpose of assessing the appropriateness of the preparation of the Group’s accounts on a going concern basis, the Directors
have prepared financial forecasts for the Group, comprising profit before and after taxation, balance sheets and cash flows through to
the year ended 2023. The forecasts consider the current cash position, the availability of banking facilities and an assessment of the
principal areas of risk and uncertainty, paying particular attention to the impact of COVID-19. These forecasts have been sensitised for
severe but plausible downside scenarios. The scenarios tested included significant reductions in profitability and associated cashflows
linked to the six principal risks highlighted in the viability statement on page 31, with consumer demand affecting all business units,
additional impacts on Agriculture business units from Brexit and a larger impact on Engineering from disruption caused by COVID-19.
The results of this stress testing showed that, due to the stability of the core business, the Group would be able to withstand the impact
of these severe but plausible downside scenarios occurring over the period of the financial forecasts.
In addition, several other mitigating measures remain available and within the control of the Directors that were not included in the
scenarios. These include withholding discretionary capital expenditure and reducing or cancelling future dividend payments.
In all the scenarios, the Group complied with its financial bank covenants, operated within its existing bank facilities, and met its
liabilities as they fall due.
Consequently, the Directors are confident that the Group and the Company will have sufficient funds to continue to meet their liabilities
as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial
statements on a going concern basis.
Basis of consolidation
The consolidated financial statements comprise Carr’s Group plc and all its subsidiaries, together with the Group’s share of the results
of its associate and joint ventures. The financial information of the subsidiaries, associate and joint ventures is prepared as of the same
reporting date and consolidated using consistent accounting policies. Group inter-company balances and transactions, including any
unrealised profits arising from Group inter-company transactions, are eliminated in full.
Results of subsidiary undertakings acquired or disposed of during the current and prior financial year were included in the financial
statements from the effective date of control or up to the date of cessation of control. The separable net assets, both tangible and
intangible, of the acquired subsidiary undertakings were incorporated into the financial statements on the basis of the fair value as at
the effective date of the Group acquiring control.
Carr’s Group plc Annual Report and Accounts 2020
85
Principal Accounting Policies
continued
Basis of consolidation continued
An investor controls an investee when it is exposed, or has right, to variable returns from its involvement with the investee and has the
ability to affect those returns through its power over the investee. Control requires power over the investee, exposure, or rights, to
variable returns and the ability to use power to affect returns. Subsidiaries are entities that meet this definition of control.
Associates are entities over which the Group has significant influence but not control, generally accompanied by a share of between
20% and 50% of the voting rights. Joint ventures are entities over which the Group has joint control, established by contractual
agreement. Investments in associates and joint ventures are accounted for using the equity method. The Group’s share of its
associate's and joint ventures’ post-tax results are recognised in the income statement, and its share of movement in reserves is
recognised in reserves. The cumulative movements are adjusted against the carrying amount of the investment. The Group’s
investment in associate and joint ventures includes any goodwill arising on acquisition. If the Group’s share of losses in an associate or
joint venture equals or exceeds its investment in the associate or joint venture, the Group does not recognise further losses, unless it
has incurred obligations or made payments on behalf of the associate or joint venture.
All subsidiaries are accounted for by applying the purchase method. The cost of a business combination is measured as the aggregate
of the fair values, at the acquisition date, of the assets given, liabilities incurred or assumed, and equity instruments issued by the
Group. The identifiable assets, liabilities and contingent liabilities of the acquiree are measured initially at fair value at the acquisition
date, irrespective of the extent of any non-controlling interest. The excess of the cost of the business combination over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities is recognised as goodwill. Contingent
consideration is measured initially at fair value and is revalued to fair value at each subsequent period end until the period in which
it is settled.
Acquisition related costs are expensed to the consolidated income statement in the year they are incurred.
The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group.
Employee share trust
IFRS 10 requires that the Group consolidate a structured entity where the substance of the relationship between the parties indicates
that the Group controls the entity. The employee share trust sponsored by the Group falls within this category of structured entity and
has been accounted for as if it were, in substance, a subsidiary.
Currency translation
The financial statements for the Group’s subsidiaries, associate and joint ventures are prepared using their functional currency. The
functional currency is the currency of the primary economic environment in which an entity operates. The presentation currency of the
Group and Company is sterling.
Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the
transactions. Exchange differences resulting from the settlement of such transactions and from the translation, at exchange rates
ruling at the balance sheet date, of monetary assets and liabilities denominated in currencies other than the functional currency are
recognised in the consolidated income statement.
The balance sheets of foreign operations are translated into sterling using the exchange rate at the balance sheet date and the income
statements are translated into sterling using the average exchange rate for the year. Where this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, the exchange rate on the transaction date is
used. Exchange differences arising are recognised as a separate component of shareholders’ equity. On disposal of a foreign operation
any cumulative exchange differences held in shareholders’ equity are transferred to the consolidated income statement.
Revenue recognition
Revenue is recognised when the Group transfers control over a product or service to its customer. Revenue is measured based on the
consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. Inter-segmental
transactions are on an arm’s length basis.
The Group recognises revenue both at a point in time and over time. Revenues generated by the Group’s Agriculture division are
recognised at a point in time. Revenues generated by the Group’s Engineering division are recognised over time where the contract
with the customer does not create an asset with an alternative use and where there is an enforceable right to payment for performance
completed to date. Where this is not the case revenue is recognised at a point in time.
In respect of contracts that meet the criteria to be recognised over time, revenue is calculated on the basis of the stage of completion
of each contract.
The Group applies a single method of measuring progress for each performance obligation satisfied over time and applies this method
consistently to similar performance obligations and in similar circumstances. Depending on the nature and circumstances of the
performance obligation, the stage of completion is determined with reference to either:
• The proportion that contract costs incurred for work performed to date bear to the total estimated contract costs; or
• The proportion that contract output is delivered towards complete satisfaction of the performance obligation with reference to
certified contract works.
86
Carr’s Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
Revenue recognition continued
Revenue is recognised for a performance obligation satisfied over time only if the Group can reasonably measure its progress towards
complete satisfaction of the performance obligation. In circumstances when it cannot reasonably measure the outcome, but expects
to recover the costs incurred in satisfying the performance obligation, the Group recognises revenue only to the extent of the costs
incurred. The Group would not be able to reasonably measure its progress towards complete satisfaction of a performance obligation
if it lacks reliable information that would be required to apply an appropriate method of measuring progress.
Where it is probable that contract costs will exceed total contract revenue the expected loss is recognised immediately as an expense
in the consolidated income statement.
Contract modifications such as variations to the original order are not accounted for until they are approved by the customer. Where a
modification to an existing contract occurs, the nature of the modification is assessed to determine whether it represents a separate
performance obligation required to be satisfied by the Group or whether it is a modification to the existing performance obligation.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the customer
and payment by the customer exceeds one year. As a consequence, the Group does not apply the time value of money to its transaction prices.
Incremental costs of obtaining a contract with a customer are only recognised when it is expected that these costs will be recovered.
Costs to obtain a contract that would have been incurred regardless of whether the contract was obtained are recognised as an
expense when incurred, unless those costs are explicitly chargeable to the customer regardless of whether the contract is obtained.
Where the amortisation period of an asset that would otherwise have been recognised is one year or less, the incremental costs of
obtaining a contract are expensed when incurred.
Contract assets exist when the Group has a right to consideration in exchange for goods or services transferred to a customer when
that right is conditional on something other than the passage of time (e.g. future performance). Contract liabilities exist when the Group
has an obligation to transfer goods or services to a customer for which the Group has already received consideration.
Retirement benefit asset/obligation
The Group offers various pension schemes to employees including a defined benefit pension scheme and several defined
contribution schemes.
The assets of the Group’s pension schemes are held separately from those of the Group and are invested with independent
investment managers.
Contributions to defined contribution schemes are charged to the consolidated income statement in the year to which they relate.
Carr’s Group Pension Scheme
The asset recognised in the consolidated and Company balance sheet at the year end is the fair value of scheme assets at the balance
sheet date less the present value of the defined benefit obligation. Independent actuaries calculate the defined benefit asset annually
using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated
future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits
will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
The service costs, including pension scheme administrative costs, are included in operating profit in the consolidated income statement.
A credit is made within interest which represents a net interest amount that is calculated by applying the discount rate at the beginning
of the year to the net defined benefit asset at the beginning of the year. The net interest amount also takes into account changes to the
net asset during the year.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the
consolidated and Company statement of comprehensive income. The pension scheme deficit or surplus, to the extent considered
recoverable, is recognised in full on the consolidated balance sheet.
IFRIC 14 confirms that where a company has an unconditional right to a refund of surplus from a defined benefit pension plan during
the lifetime of that plan or when it winds it up, and where there is expected to be surplus assets, there is no limit on the asset the
Company can show on its balance sheet. Following a review of the Scheme’s Trust deed the Directors believe that there is a right
to recognise, and that there is no restriction on the recognition of, the IAS 19 pension surplus. At 29 August 2020 and 31 August 2019,
the consolidated and Company balance sheet recognises the full surplus on the Carr’s Group defined benefit pension scheme.
The Company intends to recover the surplus through reduced contributions.
Carrs Billington Agriculture Pension Scheme
One of the Group’s subsidiaries is a participating employer in the Carrs Billington Agriculture Pension Scheme, which is a multi-employer
defined benefit pension scheme. Note 28 provides further information on this scheme and how it has been accounted for in the
consolidated accounts.
Carr’s Group plc Annual Report and Accounts 2020
87
Principal Accounting Policies
continued
Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at
fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.
Fair value is measured by use of a valuation model. The expected life used in the model has been adjusted, based on management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
At each balance sheet date the Group revises its estimate of the number of options that are expected to vest. Changes to the fair value
recognised as a result of this are charged or credited to the consolidated income statement with a corresponding adjustment to the
equity compensation reserve.
Interest
Interest is recognised in the consolidated income statement on an accruals basis using the effective interest method.
Borrowing costs
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in the consolidated income statement in the year in which they are incurred.
Operating segments
IFRS 8 requires operating segments to be identified on the basis of internal financial information about components of the Group that
are regularly reviewed by the Chief Operating Decision Maker (“CODM”) to allocate resources to the segments and to assess their
performance. The CODM has been identified as the Executive Directors.
The CODM considers the business from a product/services perspective. Reportable operating segments have been identified as
Agriculture and Engineering.
Adjusting items
Adjusting items that are material by size and/or by nature are presented within their relevant income statement category, but
highlighted separately on the face of the income statement. Items that management consider fall into this category are also disclosed
within note 5 to the financial statements. The separate disclosure of profit before adjusting items is consistent with how business
performance is measured internally and is presented to aid comparability of performance. Events which may give rise to adjusting
items include, but are not limited to, amortisation of acquired intangible assets, adjustments to contingent consideration arising from
fair value revaluation, restructuring/closure costs including the impairment of assets to recoverable amounts, acquisition related costs
and the past service costs in respect of GMP equalisation.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest in
the net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-
controlling interest in the acquiree.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the CGUs, or groups of
CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair
value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Goodwill written off to reserves under UK GAAP prior to 31 August 1998 has not been reinstated and would not form part of the gain or
loss on the disposal of a business.
Other intangible assets
Other intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation commences
when assets are available for use. The expected useful lives, over which the assets are amortised, are generally as follows:
Customer relationships
Brands
Know-how
1 – 10 years
6 – 25 years
15 years
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Strategic Report
Governance
Financial Statements
Other intangible assets continued
Proprietary technology
Development costs
Patents and trademarks
Contract backlog
Software
5 – 13 years
5 – 15 years
contractual life
3 years
3 – 10 years
Intangible assets are amortised on a straight-line basis.
The cost of intangible assets acquired in a business combination is the fair value at the acquisition date. The cost of separately
acquired intangible assets comprises the purchase price and any directly attributable costs of preparing the assets for use.
Research and development costs
All research costs are recognised in the consolidated income statement as incurred. Development costs are recognised as an asset
only to the extent that specific recognition criteria, as set out in IAS 38 ‘Intangible assets’, relevant to the proposed application are met
and the amount recognised is recoverable through future economic benefits.
Property, plant and equipment
Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses. Cost comprises
purchase price and directly attributable costs.
Freehold land and assets in the course of construction are not depreciated. For all other property, plant and equipment, depreciation is
calculated on a straight-line basis to allocate cost less residual values of the assets over their estimated useful lives as follows:
Freehold buildings
Leasehold improvements
Plant and equipment
up to 50 years
shorter of 50 years or lease term
3 to 20 years
Residual values and useful lives are reviewed, and adjusted if appropriate, at each financial year-end.
Assets not fully constructed at the balance sheet date are classified as assets in the course of construction. When construction is
complete these assets are reclassified to the appropriate heading within property, plant and equipment. Depreciation commences
when the asset is ready for use.
The cost of maintenance, repairs and minor equipment is charged to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the
consolidated income statement.
Investment property
Investment properties are properties held for long-term rental yields. Investment properties are carried in the balance sheet at cost
less accumulated depreciation. Freehold land is not depreciated. For all other investment property, depreciation is calculated on a
straight-line basis to allocate cost less residual values of the assets over their estimated useful lives as follows:
Freehold buildings
up to 50 years
The cost of maintenance, repairs and minor equipment is charged to the consolidated income statement as incurred; the cost of major
renovations and improvements is capitalised.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within the
consolidated income statement.
Impairment of non-financial assets
Non-financial assets are reviewed for impairment where there are any events or changes in circumstances that would indicate potential
impairment. In addition, at each reporting date, the Group assesses whether there is any indication that goodwill may be impaired. Where
an indicator of impairment exists, the Group makes an estimate of recoverable amount. Where the carrying amount of an asset exceeds
its recoverable amount the asset is written down to its recoverable amount. Recoverable amount is the higher of fair value less costs to
sell and value in use and is deemed for an individual asset. If the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets, the recoverable amount of the cash generating unit to which the asset belongs is determined.
Discount rates reflecting the asset specific risks and the time value of money are used for the value in use calculation.
Carr’s Group plc Annual Report and Accounts 2020
89
Principal Accounting Policies
continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Where appropriate,
cost is calculated on a specific identification basis. Otherwise inventories are valued using the first-in first-out method.
Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing,
selling and distribution.
Provision has been made, where necessary, for slow-moving, obsolete and defective inventories.
Cash and cash equivalents
Cash and cash equivalents for the purposes of the consolidated and Company statement of cash flows comprise cash at bank and in
hand, money market deposits and other short-term highly liquid investments with original maturities of three months or less and bank
overdrafts. Bank overdrafts are presented in borrowings within current liabilities in the consolidated and Company balance sheet.
Grants
Grants received on capital expenditure are recorded as deferred income and taken to the consolidated income statement in equal
annual instalments over the expected useful lives of the assets concerned.
Revenue grants and contributions are taken to the consolidated income statement in the year to which they apply.
Leases
The Group and Company adopted IFRS 16 ‘Leases’ with effect from 1 September 2019 and have applied the standard using the
modified retrospective approach under which the cumulative effect of initially applying the standard is recognised at the date of initial
application. Further details of the effect of the adoption of IFRS 16 and the new accounting treatment for leases where the Group or
Company is the lessee can be found within the new standards and interpretations section on pages 91 to 93.
Prior to transition to IFRS 16 the accounting policy was:
Leases are classified as finance leases at inception where substantially all of the risks and rewards of ownership are transferred to the
Group. Assets classified as finance leases are capitalised on the consolidated balance sheet and are depreciated over the shorter of
the useful life of the asset and the term of the lease. The interest element of the rental obligations is charged to the consolidated
income statement over the period of the lease using the actuarial method.
Rentals paid under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the
lease. Leasehold land is normally classified as an operating lease. Payments made to acquire leasehold land are included in
prepayments at cost and are amortised over the life of the lease. Any incentives to enter into operating leases are recognised as a
reduction of rental expense over the lease term on a straight-line basis.
Tax
The tax charge comprises current tax and deferred tax.
The current tax charge represents an estimate of the amounts payable to tax authorities in respect of the Group’s taxable profits.
Deferred tax is provided on temporary differences arising between the tax base of assets and liabilities and their carrying amounts in
the consolidated and Company financial statements. Deferred tax arising from initial recognition of an asset or liability in a transaction,
other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss, is not
recognised. Deferred tax is measured using tax rates that have been enacted or substantively enacted by the balance sheet date and
are expected to apply when the asset is realised or the liability is settled.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where
the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
Tax is recognised in the consolidated income statement, unless the tax relates to items recognised directly in shareholders’ equity, in which
case the tax is recognised directly in shareholders’ equity through the consolidated and Company statement of comprehensive income.
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Strategic Report
Governance
Financial Statements
Dividends
Final equity dividends to the shareholders of the Company are recognised in the year that they are approved by the shareholders.
Interim equity dividends are recognised in the year that they are paid.
Dividends receivable are recognised in the period in which they are received.
Classification of financial instruments issued by the Group and Company
Financial instruments issued by the Group and Company are treated as equity only to the extent that they meet the following two
conditions:
(a) they include no contractual obligations upon the Group or Company to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group or Company;
and
(b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no
obligation to deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the
Company’s exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified
takes the legal form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and
share premium account exclude amounts in relation to those shares.
Financial instruments
Financial assets and liabilities are recognised on the consolidated and Company balance sheet when the Group and Company
becomes a party to the contractual provisions of the instrument.
The Group and Company classifies its financial assets under the measurement categories of amortised cost, for non-derivative
financial assets, or measured subsequently at fair value through either profit or loss or comprehensive income.
Non-derivative financial assets
Non-derivative financial assets include contract assets, trade and other receivables and non-current receivables. As these categories
of financial assets do not carry a significant financing element, expected credit losses are measured using the simplified impairment
approach. This requires expected lifetime losses to be recognised upon the initial recognition of the asset.
Non-derivative financial assets are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method.
Derivative financial instruments and hedging activities
The Group primarily uses forward foreign currency contracts, options and currency swaps to manage its exposures to fluctuating
foreign exchange rates. These instruments are initially recognised at fair value and are subsequently remeasured at their fair value at
each balance sheet date.
The Group’s policy is to hedge its international assets and it has designated foreign currency loans as a hedge against net investment
in foreign operations. The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is
determined as an effective hedge is recognised directly in equity. The gain or loss on any ineffective portion of the hedge is recognised
immediately in the consolidated income statement. The Group continues to apply IAS 39 for the purposes of hedge accounting as
permitted by IFRS 9.
New standards and interpretations
From 1 September 2019 the following became effective and were adopted by the Group and Company:
IFRS 16 ‘Leases’
IFRIC 23 ‘Uncertainty over income tax treatments’
Amendment to IFRS 9 ‘Financial instruments on prepayment features with negative compensation’
Amendments to IAS 28 ‘Investment in associates’, on long-term interests in associates and joint ventures
Annual improvements to IFRSs – 2015-2017 cycle
Amendments to IAS 19 ‘Employee benefits’
With the exception of IFRS 16, which is discussed further below, the adoption of the above amendments and interpretations has had no
impact on the Group or Company’s profit for the year or equity.
Carr’s Group plc Annual Report and Accounts 2020
91
Principal Accounting Policies
continued
New standards and interpretations continued
IFRS 16 'Leases'
The Group adopted IFRS 16 with effect from 1 September 2019 and has applied the standard using the modified retrospective
approach under which the cumulative effect of initially applying the standard is recognised at the date of initial application. The Group
has restated its opening total equity position as at 1 September 2019 by a charge of £1.4m. Comparative information has not been
restated and is therefore still reported under IAS 17 ‘Leases’ and related interpretations. To assist comparability, note 37 shows the
balance sheet as at 29 August 2020 had the Group continued to adopt IAS 17 and related interpretations.
Under the modified retrospective approach used, the Group has recognised right-of-use assets at their carrying amounts as if the
standard had been applied since the commencement date, but discounted using the Group’s incremental borrowing rate at the date of
initial application. The liability has been recognised at an amount equal to the present value of the remaining lease payments,
discounted using the Group’s incremental borrowing rate at the date of initial application. The incremental borrowing rates used range
between 1.3% – 3.88% based on the geographic location and economic circumstances of the lessee. In addition to existing finance
leased assets with a net book value of £4.4m being transferred to right-of-use assets on transition, £11.5m of right-of-use assets were
recognised on transition in respect of leases previously accounted for as operating leases under IAS 17. An additional lease obligation
of £12.7m was recognised on transition in respect of leases previously accounted for as operating leases. Prepayments and accruals
totalling £0.5m have been removed from the balance sheet on transition.
A reconciliation of operating lease commitments disclosed as at 31 August 2019 to the lease liabilities recognised on transition is as follows:
Operating lease commitments as at 31 August 2019
Discounted using the incremental borrowing rate at initial application
Inclusion of liabilities beyond break clauses
Other
Lease liabilities (excluding existing finance lease liabilities) at 1 September 2019
Included within:
Current liabilities
Non-current liabilities
The following table shows the effect of IFRS 16 on the income statement for the period ended 29 August 2020.
Reduction in lease expense recognised
Depreciation on right-of-use assets
Profit on disposal of right-of-use leases
Interest cost of lease liabilities
Impact on Group profit before tax
£’000
12,917
(4,365)
3,746
357
12,655
1,618
11,037
12,655
£’000
2,100
(1,832)
37
(362)
(57)
Depreciation, profit on disposal and interest costs in the table above exclude amounts in respect of finance leases that would have been
recognised in the income statement under IAS 17.
On transition to IFRS 16 the Group has applied the following practical expedients permitted by the standard on a lease-by-lease basis:
• Accounting for leases where the lease term ends within 12 months of the date of initial application as short-term leases;
• Exclusion of initial direct costs from the measurement of the right-of-use asset at the date of initial application; and
• Use of hindsight, such as in determining the lease term if the contract contains options to extend or terminate the lease.
The Group is not required to make any transition adjustment for leases previously classified as operating leases under IAS 17 where the
underlying asset is of low value.
The Group is also not required to reassess whether a contract is, or contains, a lease at the date of initial application. IFRS 16 permits
the Group to apply the standard only to contracts that were previously identified as containing a lease under IAS 17 and IFRIC 4
‘Determining whether an arrangement contains a lease’.
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Strategic Report
Governance
Financial Statements
New standards and interpretations continued
The Group leases properties, motor vehicles, plant and machinery and other equipment. Lease terms are negotiated on an individual
basis and contain a wide range of terms and conditions.
Prior to transition to IFRS 16 the Group classified leases as either finance leases or operating leases in accordance with IAS 17.
Payments made under operating leases were charged to the income statement on a straight-line basis over the term of the lease.
Since transition to IFRS 16, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased
asset is available for use by the Group. Each lease payment is allocated between the repayment of the lease liability and finance cost.
The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and
the lease term on a straight-line basis and is also subject to regular impairment reviews.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value
of the following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• Variable lease payments that are based on an index or rate;
• Amounts expected to be payable by the lessee under residual value guarantees;
• The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
• Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the interest rate implicit in the lease. Where this cannot be determined, the lessee’s
incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset
of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of the lease liability;
• Any lease payments made at of before the commencement date less any lease incentives received;
• Any initial direct costs incurred by the lessee; and
• Restoration costs required by the terms and conditions of the lease.
At the commencement date of property leases the Group normally determines the lease term to be the full term of the lease,
assuming that any option to break or extend the lease is unlikely to be exercised and it is not reasonably certain that the Group will
continue in occupation for any period beyond the lease term. Leases are regularly reviewed and will be revalued if it becomes likely
that a break clause or option to extend the lease is exercised.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in
the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets generally comprise minor
office and IT equipment.
The Group acts as lessor in certain operating lease arrangements. Rental income is recognised on a straight-line basis in the income
statement. The Group is not a lessor in any finance lease arrangements.
New standards, amendments and interpretations issued but not yet effective and not early adopted
Amendments to References to the Conceptual Framework in IFRS standards
Amendments to IFRS 3 'Business combinations’
Amendments to IAS 1 and IAS 8 to update the definition of material
Amendments to IFRS 7, IFRS 9 and IAS 39 addressing issues affecting financial reporting in the period leading up to IBOR reform
Amendment to IFRS 16 ‘Leases’ for COVID-19 related rent concessions
It is considered that the above amendments will not have a significant effect on the results or net assets of the Group or Company.
Significant judgements, key assumptions and estimates
Application of certain Group accounting policies requires management to make judgements, assumptions and estimates concerning
the future as detailed below.
The following is considered to be a significant judgement:
Leases
Significant judgements are required, principally in respect of property leases, when determining the lease term where the lease
contains break clauses or options to extend the term. The Group has several property leases and in valuing these assets the Group has
assumed that the right to break or extend the lease is not exercised. The Group will regularly monitor these leases and should this
assumption become inappropriate the asset and liability will be revalued accordingly.
Carr’s Group plc Annual Report and Accounts 2020
93
Principal Accounting Policies
continued
Significant judgements, key assumptions and estimates continued
The following are considered to be accounting estimates:
Valuation of pension obligations
The valuation of the Group’s defined benefit pension scheme is determined each year following advice from a qualified independent
actuary and can fluctuate based on a number of external factors. Such factors include the major assumptions as shown in the table in
note 28 and actual returns on scheme assets compared to those predicted in the previous scheme valuation. It is reasonably possible, on
the basis of existing knowledge, that outcomes within the next financial year that are different from the assumption could require a
material adjustment to the carrying amount of the assets affected. An income statement charge of £795,000 has been recognised in the
prior year in respect of the impact of GMP equalisation for the Carr's Group Pension Scheme. The carrying value of the defined benefit
pension scheme surplus at 29 August 2020 is £8.0m (2019: £7.8m). More information on the pension scheme is given in note 28.
The associate’s defined benefit pension scheme is also subject to these estimation uncertainties. In addition, for assets falling within the
IFRS 13 fair value hierarchy level 3 inputs category, there is exposure to estimation uncertainty when estimating the asset value. The
surplus being recognised by the associate is £3.5m (2019: £1.9m) of which the Group recognises 49% in its balance sheet within its
‘Investment in associate’.
Impairment of goodwill
The carrying value of goodwill must be assessed for impairment annually, or more frequently if there are indications that goodwill
might be impaired. This requires an estimation of the value in use of the cash generating units to which goodwill is allocated. Value in
use is dependent on estimations of future cash flows from the cash generating unit and the use of an appropriate discount rate to
discount those cash flows to their present value.
No impairment was identified in the current or prior year. The carrying value of goodwill at 29 August 2020 is £32.0m (2019: £32.9m).
Further details of cash generating units and stress testing performed on the carrying values can be found in note 11.
Provision for impairment of trade receivables
The financial statements include a provision for impairment of trade receivables that is based on management’s estimation of
recoverability. There is a risk that the provision will not match the trade receivables that ultimately prove to be irrecoverable. The
carrying value of the provision for impairment of trade receivables at 29 August 2020 is £1.9m (2019: £1.3m). Further details of the
provision, including ageing profile, can be found in note 22.
Revenue recognition on contracts
For contracts recognised over time the Group recognises revenue and profits based on the stage of completion. This requires
management to make an assessment of performance obligations under each contract, the ability to reasonably estimate the outcome,
and the point at which those obligations have been fulfilled. Management uses estimates and judgements when assessing the total
expected costs on a contract. The Group has controls in place to review and monitor the estimates used to ensure they are appropriate.
Disclosures relating to the disaggregation of revenue for revenues recognised at a point in time and revenues recognised over time can
be found in note 3.
Valuation of acquired intangible assets
IFRS 3 ‘Business combinations’ requires the acquiror to fair value identifiable assets of an acquired business including intangible
assets. The fair value of intangible assets is determined using valuation techniques such as relief-from-royalty, replacement cost and
multi-period excess earnings method. These techniques and models require inputs based on estimations such as forecasted profits,
technology obsolescence rates, royalty rates, discount rates and useful economic lives.
There were no acquisitions during the year. In the prior year the Group made acquisitions with a combined intangible asset fair value of
£6.6m (note 11).
Valuation of contingent consideration
IFRS 3 ‘Business combinations’ requires contingent consideration to be measured initially at fair value and then subsequently revalued
to fair value at each period end. This involves an estimate of expected future payments based on profit forecasts and discount rates to
reflect the time value of money. Further details in respect of contingent consideration, including movements in fair value between
opening and closing balances, is included in note 27.
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Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statements
Strategic Report
Governance
Financial Statements
1 The Company has taken advantage of the exemption, under section 408 of the Companies Act 2006, from presenting its own income
statement. The profit after tax for the year dealt with in the accounts of the Company was £6,739,000 (2019: £6,768,000).
2 Segmental information
The chief operating decision maker (“CODM”) has been identified as the Executive Directors. Management has identified the operating
segments based on internal financial information reviewed by the CODM. The CODM considers the business from a product/services
perspective. Reportable operating segments have been identified as Agriculture and Engineering. Central comprises the central
business activities of the Group's head office, which earns no external revenues. Operating segments have not been aggregated for the
purpose of determining reportable segments.
Agriculture aims to provide for all farming requirements. It derives its revenue from the sale of animal feed, feed blocks and animal
health products together with retail sales of farm equipment, fuels and farm consumables.
Engineering derives its revenue from the provision of engineering services and the design and manufacture of bespoke equipment for
use in the nuclear, naval defence, oil and gas, and petrochemical industries. Products include manipulators, robotics, specialist
fabrication and precision machining.
Performance is assessed using operating profit. For internal purposes the CODM assesses operating profit before material adjusting
items (note 5) consistent with the presentation in the financial statements.
Inter-segmental transactions are all undertaken on an arm’s length basis.
The Group has operations in the UK and overseas. In accordance with IFRS 8, entity-wide disclosures based on the geography of
operations is also presented. The geographical analysis of revenue is presented by revenue origin.
The segmental information for the year ended 29 August 2020 is as follows:
Total segment revenue
Inter-segment revenue
Revenue from external customers
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
Share of post-tax results of associate and joint ventures
Adjusted1 operating profit
Adjusting items (note 5)
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusting items (note 5)
Profit before taxation
Agriculture
£’000
Engineering
£’000
Central
£’000
Group
£’000
342,627
(5)
53,020
(12)
— 395,647
(17)
—
342,622
53,008
— 395,630
14,798
(4,031)
2,633
13,400
42
13,442
6,754
(2,944)
(781)
(182)
20,771
(7,157)
—
—
2,633
3,810
(2,449)
(963)
—
16,247
(2,407)
1,361
(963)
13,840
313
(1,656)
14,904
(2,407)
12,497
1 Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
disclosed in note 5.
2 Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and share of post-tax results of associate and joint
ventures.
Carr’s Group plc Annual Report and Accounts 2020
95
2 Segmental information continued
Assets and liabilities
Segment gross assets
Segment gross liabilities
Agriculture
£’000
Engineering
£’000
Central
£'000
Group
£’000
145,413
83,852
18,078 247,343
(53,509)
(31,156)
(28,509)
(113,174)
The segmental information for the year ended 31 August 2019 is as follows. This has been restated to present Central costs separately.
This is to aid comparability with the segmental information presented for the current year.
Total segment revenue
Inter-segment revenue
Revenue from external customers
Adjusted1 EBITDA2
Depreciation, amortisation and profit/(loss) on disposal of non-current assets
Share of post-tax results of associate (adjusted1) and joint ventures
Adjusted1 operating profit
Adjusted items
Operating profit
Finance income
Finance costs
Adjusted1 profit before taxation
Adjusted items
Profit before taxation
Agriculture
£’000
Engineering
£’000
Central
£'000
Group
£’000
357,399
(11)
46,556
(39)
— 403,955
(50)
—
357,388
46,517
— 403,905
14,914
(2,946)
2,683
14,651
(531)
7,796
(1,879)
—
5,917
65
(1,554)
(84)
—
(1,638)
(1,269)
21,156
(4,909)
2,683
18,930
(1,735)
14,120
5,982
(2,907)
17,195
463
(1,349)
18,044
(1,735)
16,309
1
2
Adjusted results are consistent with how business performance is measured internally and is presented to aid comparability of performance. Adjusting items are
disclosed in note 5.
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current assets and share of post-tax results of associate and joint
ventures.
Assets and liabilities
Segment gross assets
Segment gross liabilities
Agriculture
£’000
Engineering
£’000
Central
£'000
Group
£’000
157,685
82,436
16,229 256,350
(67,476)
(25,678)
(32,206) (125,360)
Entity-wide disclosures
Revenues from external customers are derived from the sale of products/services by individual business segment. The breakdown of
revenue by business segment is provided above.
Revenues from external customers:
UK
Europe
USA
New Zealand
Other
96
Carr’s Group plc Annual Report and Accounts 2020
2020
£’000
2019
£’000
337,126 346,824
10,680
12,012
46,186
43,734
1,628
1,298
10
37
395,630 403,905
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
2 Segmental information continued
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investment in associate
Interest in joint ventures
Other investments
Non-current receivables
Retirement benefit asset
UK
£’000
17,855
7,684
21,670
14,283
158
14,307
2,928
50
—
8,037
Europe
£’000
5,929
519
8,183
—
—
—
3,462
1
—
—
2020
USA
£’000
8,257
967
8,373
573
—
—
4,161
22
20
—
New
Zealand
£’000
Total
£’000
UK
£’000
— 32,041
17,855
9,171
1
7,516
33 38,259 25,690
—
164
13,392
2,470
50
—
7,769
— 14,856
—
158
— 14,307
10,551
—
73
—
—
20
8,037
—
Europe
£’000
5,997
560
8,629
—
—
—
3,102
1
—
—
2019
USA
£’000
9,025
1,242
7,561
—
—
—
4,099
25
22
—
New
Zealand
£’000
Total
£’000
— 32,877
9,318
—
41,917
37
—
—
164
—
13,392
—
9,671
—
76
—
22
—
7,769
—
86,972 18,094 22,373
34 127,473 74,906
18,289
21,974
37 115,206
Major customers
There are no revenues from transactions with individual customers which amount to 10% or more of Group revenue.
3 Revenue
Disaggregation of revenue
In accordance with IFRS 15 ‘Revenue from Contracts with Customers’ the following table presents the Group’s reported revenue
disaggregated based on the timing of revenue recognition.
Timing of revenue recognition
Over time
At a point in time
Transaction price allocated to the remaining performance obligations
2020
£’000
2019
£’000
34,790
27,840
360,840 376,065
395,630 403,905
2021
£’000
2022
£’000
2023
onwards
£’000
Total
£’000
Total transaction price allocated to the remaining performance obligations
23,968
4,660
569
29,197
The total transaction price allocated to the remaining performance obligations represents the contracted revenue to be earned by the
Group for distinct goods and services which the Group has promised to deliver to its customers. These include promises which are
partially satisfied at the period end or those which are unsatisfied but which the Group has committed to providing. In deriving this
transaction price, any element of variable revenue is estimated at a value that is highly probable not to reverse in the future.
The transaction price above does not include any estimated revenue to be earned on framework contracts for which a firm order or
instruction has not been received by the customer.
Carr’s Group plc Annual Report and Accounts 2020
97
4 Operating profit
Group operating profit is stated after (crediting)/charging:
Amortisation of grants
Loss/(profit) on disposal of property, plant and equipment
Profit on disposal of right-of-use leases
Depreciation and impairment of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of owned investment property
Amortisation of intangible assets
Business combination expenses (note 5)
Restructuring/closure costs (note 5)
Foreign exchange losses/(gains)
Derivative financial instruments (gains)/losses
Operating lease charges (IAS 17)
Research and development expense
Auditors’ remuneration:
Audit services (Company £17,137; 2019: £16,719)
The auditing of accounts of subsidiaries of the Company pursuant to legislation (including overseas)
Total audit services
Included within Group operating profit is the following in respect of investment property leased to,
and occupied by, external parties:
Rental income
Operating expenses
2020
£’000
2019
£’000
(55)
265
(37)
4,567
2,462
6
1,513
—
1,964
57
(3)
—
2,066
75
290
365
(54)
(30)
—
4,804
—
6
943
509
437
(153)
26
2,094
3,111
73
184
257
(42)
43
1
(40)
42
2
The auditors' remuneration of £365,000 includes a £50,000 additional fee raised in the year in respect of the audit of the prior year.
5 Adjusting items
In reporting financial information, the Group presents alternative performance measures (“APMs”), which are not defined or specified
under the requirements of IFRS. These APMs are consistent with how business performance is measured internally and therefore the
Group believes that these APMs provide stakeholders with additional useful information on the performance of the business. The
following adjusting items have been added back to reported profit measures.
Amortisation of acquired intangible assets (i)
Adjustments to contingent consideration (ii)
Restructuring/closure costs (iii)
Business combination expenses (iv)
Past service cost – Group (v)
Past service cost – share of associate (v)
2020
£’000
1,380
(937)
1,964
—
—
—
2,407
2019
£’000
814
(1,126)
437
509
795
306
1,735
(i) Amortisation of acquired intangible assets which do not relate to the underlying profitability of the Group but rather relate to costs
arising on acquistion of businesses.
(ii) Adjustments to contingent consideration arise from the revaluation of contingent consideration in respect of acquisitions to fair value
at the year end. Movements in fair value arise from changes to the expected payments since the previous year end based on actual
results and updated forecasts. Any increase or decrease in fair value is recognised through the income statement.
(iii) Restructuring/closure costs include redundancy costs and impairments of assets to recoverable amounts. The impairment to
property, plant and equipment was £239,000 (2019: £nil).
(iv) Business combination expenses relate to acquisition costs incurred.
(v) The scheme actuary's estimated effect on the Group's, and share of associate's, pension scheme liabilities following the equalisation
of Guaranteed Minimum Pensions (“GMPs”). For further details of the past service costs see note 28.
98
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
6 Staff costs
The tables below include Directors.
Wages and salaries
Social security costs
Pension costs
Share-based payments
Strategic Report
Governance
Financial Statements
2020
£’000
44,627
5,045
2,683
(137)
2019
£’000
39,868
4,460
3,189
880
52,218
48,397
Included within pension costs is a charge of £13,000 (2019: £816,000) in respect of the defined benefit pension scheme. The prior year
charge includes £795,000 in respect of GMP equalisation. Further details of this charge can be found in note 28.
The average monthly number of employees during the year was made up as follows:
Sales, office and management
Manufacture and distribution
2020
Number
638
572
1,210
2019
Number
614
539
1,153
Key management is considered to be the Directors of the Group.
The following amounts are disclosed in accordance with Schedule 5 of the Large and Medium-Sized Companies and Groups (Accounts
and Reports) Regulations 2008.
Aggregate Directors’ remuneration1
Aggregate pension contributions2
Aggregate amount of gains on exercise of share options3
2020
£’000
1,004
20
474
1,498
2019
£’000
1,012
20
471
1,503
1 Salary (after salary sacrifice of pension), fees, bonuses, pay in lieu of pension and benefits in kind.
2 Cash contributions paid in the year into the defined contribution pension scheme.
3 Gains realised in the year in respect of the LTIP.
The number of Directors in the defined contribution pension scheme during the year was two (2019: two).
Further details of the Directors’ emoluments, pension benefits and share options are given in the Remuneration Committee Report on
pages 53 to 66.
7 Finance income and finance costs
Finance income
Bank interest
Net interest on the net defined benefit retirement asset (note 28)
Other interest
Total finance income
Finance costs
Interest payable on bank overdrafts
Interest payable on bank loans and other borrowings
Interest payable on leases
Other interest
Total finance costs
2020
£’000
151
139
23
313
(149)
(934)
(461)
(112)
2019
£’000
127
284
52
463
(117)
(1,016)
(82)
(134)
(1,656)
(1,349)
Interest payable on leases recognises an additional £0.4m following the adoption of IFRS 16.
Carr’s Group plc Annual Report and Accounts 2020
99
8 Taxation
(a) Analysis of the charge in the year
Current tax:
UK corporation tax
Current year
Adjustment in respect of prior years
Foreign tax
Current year
Adjustment in respect of prior years
Group current tax
Deferred tax:
Origination and reversal of timing differences
Current year
Adjustment in respect of prior years
Group deferred tax (note 19)
Tax on profit
2020
£’000
2019
£’000
1,077
(150)
356
(217)
1,066
1,447
45
1,557
109
3,158
450
59
509
(357)
(116)
(473)
1,575
2,685
Deferred tax recognised in equity is disclosed in note 19.
(b) Factors affecting tax charge for the year
The tax assessed for the year is lower (2019: lower) than the rate of corporation tax in the UK of 19% (2019: 19%). The differences are
explained below:
Profit before taxation
Tax at 19% (2019: 19%)
Effects of:
Tax effect of share of results of associate and joint ventures
Tax effect of expenses that are not allowable in determining taxable profit
Tax effect of non-taxable income
Effects of different tax rates of foreign subsidiaries
Effects of changes in deferred tax rates
Unrecognised deferred tax on losses
Adjustment in respect of prior years
Total tax charge for the year
2020
£’000
2019
£’000
12,497
16,309
2,374
3,099
(500)
184
(633)
83
304
71
(308)
(452)
180
(482)
256
(24)
70
38
1,575
2,685
The tax effect of expenses that are not allowable in determining taxable profit includes adjustments for share-based payments,
depreciation and amortisation of non-qualifying assets, and other expenses disallowable for UK corporation tax. The prior year also
includes business combination expenses (note 5) which were treated as disallowable for tax purposes.
The tax effect of non-taxable income includes adjustments to contingent consideration (note 5) and the effect of income within the
patent box regime.
(c) Change in corporation tax rate
The prevailing UK corporation tax rate of 19% was substantively enacted as part of the Finance Act 2019 on 12 March 2019. The rate was
due to reduce to 17% from April 2020, however, in the budget on 12 March 2020 it was announced that the main rate of UK corporation tax
will be held at 19%. Deferred tax is therefore provided at 19%. UK deferred tax balances at the prior year end were provided at 17%.
100
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
9 Dividends
Equity
Second interim paid for the year ended 31 August 2019 of 1.125p per 2.5p share (2018: 1.075p)
Final dividend for the year ended 31 August 2019 of 2.5p per 2.5p share (2018: 2.35p)
First interim paid for the year ended 29 August 2020 of nil per 2.5p share (2019: 1.125p)
Strategic Report
Governance
Financial Statements
2020
£’000
1,034
2,310
—
3,344
2019
£’000
983
2,156
1,034
4,173
Since the year end an interim dividend of £2,079,551, being 2.25p per share, has been paid. This includes the deferred first interim
dividend that, under normal circumstances, would have been paid in May 2020. This was deferred due to the uncertainty associated with
the COVID-19 pandemic. The financial statements do not reflect the dividend payable.
The proposed final dividend for the year ended 29 August 2020 to be considered by shareholders at the Annual General Meeting is
£2,310,612 being 2.5p per share, making a total for the year of 4.75p (2019: 4.75p). Shares held in treasury do not carry entitlement to a
dividend. The financial statements do not reflect this proposed final dividend as payable.
10 Earnings per ordinary share
Earnings per share are calculated by reference to a weighted average of 92,346,828 shares (2019: 91,828,015) in issue during the year.
Adjusting items disclosed in note 5 that are charged or credited to profit do not relate to the underlying profitability of the Group. The
Board believes adjusted profit before these items provides a useful measure of business performance. Therefore an adjusted earnings
per share is presented as follows:
2020
2019
Earnings per share – basic
Adjusting items:
Amortisation of acquired intangible assets
Adjustments to contingent consideration
Restructuring/closure costs
Business combination expenses
Past service cost — Group
Past service cost — share of associate
Taxation effect of the above
Non-controlling interest in the above
Earnings per share – adjusted
Earnings
£’000
9,533
1,380
(937)
1,964
—
—
—
(639)
(273)
Earnings
per share
pence
Earnings
£’000
Earnings
per share
pence
10.3
12,049
13.1
1.5
(1.0)
2.1
—
—
—
(0.7)
(0.3)
814
(1,126)
437
509
795
306
(367)
(57)
0.9
(1.2)
0.5
0.6
0.9
0.3
(0.4)
(0.1)
14.6
11,028
11.9
13,360
For diluted earnings per share, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all dilutive
potential Ordinary Shares. The potentially dilutive Ordinary Shares, where the exercise price is less than the average market price of the
Company’s Ordinary Shares during the year, are disclosed in note 30.
Carr’s Group plc Annual Report and Accounts 2020
101
10 Earnings per ordinary share continued
Earnings per share
Effect of dilutive securities:
Share Save Scheme
Long Term Incentive Plan
Diluted earnings per share
2020
Weighted
average
number of
shares
Earnings
£’000
Earnings
per share
pence
Earnings
£’000
2019
Weighted
average
number of
shares
9,533
92,346,828
10.3
12,049 91,828,015
—
—
978,350
405,866
9,533
93,731,044
(0.1)
—
10.2
—
—
748,265
1,771,378
12,049 94,347,658
Adjusted
earnings
£’000
Weighted
average
number of
shares
Earnings
per share
pence
Adjusted
earnings
£’000
Weighted
average
number of
shares
Diluted adjusted earnings per share
11,028
93,731,044
11.8
13,360 94,347,658
11 Goodwill and other intangible assets
Earnings
per share
pence
13.1
(0.1)
(0.2)
12.8
Earnings
per share
pence
14.2
Group
Company
Goodwill
£’000
Customer
relationships
£’000
Know-how,
technology and
development
costs
£’000
Brands,
patents and
trademarks
£’000
Contract
backlog
£’000
Software
£’000
Total
£’000
Software
£’000
235
15
—
—
250
(21)
—
—
229
85
9
80
174
(18)
73
1,100
8
—
1,165
2,273
(10)
1,416
(3)
30,466
732
14,603
1,351
47,152
(1,012)
1,459
(3)
3,676
47,596
719
7
75
801
(13)
70
3,971
43
943
4,957
(86)
1,513
229
858
6,384
530
7
1,999
178
2,714
(12)
37
—
1,699
96
1,302
8
3,105
(133)
6
—
2,739
2,978
461
26
205
692
(46)
243
889
76
1
461
538
(9)
474
1,003
454
2,176
1,736
1,238
2,413
2,089
150
76
—
381
26,495
1,472
42,195
2,818
41,212
328
—
—
89
417
—
—
—
417
—
—
41
41
—
42
83
328
376
334
Cost
At 2 September 2018
Exchange differences
Subsidiaries acquired
Additions
At 31 August 2019
Exchange differences
Additions
Disposals
At 29 August 2020
Accumulated amortisation and
impairment
At 2 September 2018
Exchange differences
Charge for the year
At 31 August 2019
Exchange differences
Charge for the year
At 29 August 2020
Net book amount
At 1 September 2018
At 31 August 2019
At 29 August 2020
26,813
606
7,999
—
35,418
(836)
—
—
34,582
2,541
—
—
2,541
—
—
2,541
24,272
32,877
89
—
3,303
—
3,392
—
—
—
3,392
89
—
122
211
—
653
864
—
3,181
32,041
2,528
102
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
11 Goodwill and other intangible assets continued
During the prior year goodwill of £7,999,000 arose on acquisitions. Goodwill represented the excess of the consideration paid over the
Group’s interest in the net fair value of the net identifiable assets, liabilities and contingent liabilities acquired.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to cash generating units that are
expected to benefit from the synergies of the combination.
The carrying value of goodwill has been allocated to the following cash generating units:
Carrs Billington Agriculture (Sales) Ltd
Carrs Agriculture Ltd – UK feed blocks
Animal Feed Supplement, Inc.
Wälischmiller Engineering GmbH
Carr’s Engineering Ltd – Chirton profit centre
NuVision Engineering, Inc.
Animax Ltd
NW Total Engineered Solutions Ltd
2020
£’000
5,285
2,068
19
5,929
2,526
8,238
1,742
6,234
2019
£’000
5,285
2,068
21
5,997
2,526
9,004
1,742
6,234
32,041
32,877
Goodwill arising on the acquisition of overseas subsidiaries has been retranslated at the balance sheet date.
During the year there was an internal restructuring of Carrs Billington Agriculture (Sales) Ltd, the primary purpose of which was to better
leverage economies of scale within the business and to operate more efficiently across its core components rather than operating as
regional profit centres working semi-independently of each other. Internal financial reporting, such as the budget for the year to August
2021 and forecast information for the four years to August 2025, have been prepared on this basis. Given that it is no longer possible to
separate revenues and cash inflows over historic profit centres, it is no longer appropriate to view the profit centres as cash generating
units for this business. A reassessment of cash generating units was undertaken, and it was determined that the business comprised one
integrated cash generating unit, which is consistent with the lowest level of monitoring of goodwill that is undertaken. The table above
therefore now includes goodwill of £5.3m against a single cash generating unit. To aid comparability the prior year has been restated to
also show goodwill against a single cash generating unit.
Goodwill is tested annually for impairment, or more frequently if there are indications that goodwill might be impaired. Goodwill is tested
for impairment by estimating future cash flows from the cash generating units to which goodwill has been allocated and discounting
those cash flows to their present value. Each unit or group of units to which goodwill is allocated represents the lowest level within the
entity at which the goodwill is monitored for internal management purposes. The key assumptions in this calculation are the levels of
future cash flows, particularly in the perpetuity period, and the discount rate. Management estimates discount rates using pre-tax rates
that reflect current market assessments of the time value of money and the risks specific to the cash generating units.
Carr’s Group plc Annual Report and Accounts 2020
103
11 Goodwill and other intangible assets continued
Cash flows are estimated using the most recent budget information for the year to August 2021, which has been approved by the Board
and forecast information for the four years to August 2025 based on medium-term business plans and an assumption for long-term
growth of between 1-3% excluding inflation. The pre-tax discount rates used to discount the forecast cash flows for all cash generating
units are in the range 4.82% – 8.18% (2019: 3.42% – 10.29%).
The Directors consider the assumptions adopted in calculating the cash flows to be consistent with historical performance and to be
reasonable given current market conditions.
Significant headroom exists in each of the cash generating units and, based on the stress testing performed, reasonable
possible changes in the assumptions would not cause the carrying amount of the cash generating units to equal or to exceed their
recoverable amount, other than potentially for Animax and the Chirton profit centre.
For the Animax cash generating unit, the assumptions underpinning the cash flow projections used in the value in use calculation reflect
an appropriate view of past experience adjusted for the potential growth including benefits in respect of the new automation system to
improve future profitability. The estimated recoverable amount of the cash generating unit significantly exceeded its carrying value and
therefore the Directors concluded that no impairment was required; however the calculations are sensitive to changes in key
assumptions. The key assumptions considered by the Directors, where a reasonably possible change could give rise to an impairment,
were the long-term growth rate and discount rate. If the pre-tax discount rate assumption was increased by 14.7%, the cash generating
unit's recoverable amount would be reduced to a level comparable with its carrying value. If this higher discount rate assumption was
combined with a 1% decrease in the long-term growth rate, which, although not management’s current expectation is considered to be
reasonably possible, this would lead to an impairment charge of £0.3m.
For the Chirton profit centre cash generating unit, the estimated recoverable amount of the cash generating unit exceeded its carrying
value by approximately £6.5m and therefore the Directors concluded that no impairment was required; however the calculations are
sensitive to changes in key assumptions, in particular reasonably possible changes to the discount rate. If the pre-tax discount rate
assumption was increased by 4.8%, the cash generating unit's recoverable amount would be reduced to a level comparable with its
carrying value. To trigger a material impairment the discount rate would have to increase to over 14.3%.
Amortisation and impairment charges are recognised within administrative expenses and have been highlighted separately within
adjusting items (note 5) where they relate to acquired intangible assets.
There is no goodwill in the Company (2019: none).
Significant cash generating units
The following key assumptions have been used in the impairment testing for goodwill with a significant carrying value:
Cash generating unit
NuVision Engineering, Inc.
NW Total Engineered Solutions Ltd
Wälischmiller Engineering GmbH
Carrs Billington Agriculture (Sales) Ltd
Carr’s Engineering Ltd – Chirton profit centre
Carrs Agriculture Ltd – UK feed blocks
Animax Ltd
Goodwill
carrying
value
£’000
Pre-tax
discount rate
%
Long-term
average
growth in
EBIT1
%
Long-term
growth rate
%
8,238
6,234
5,929
5,285
2,526
2,068
1,742
8.18
8.18
8.18
4.82
8.18
4.82
4.82
1.9
3.0
3.8
3.7
57.8
2.3
16.7
2
2
2
2
2
2
2
Stress testing of the future cash flows generated from these cash generating units shows that an impairment of goodwill would potentially
arise should cash flows fall by 64% in NuVision Engineering Inc. by 59% in NW Total Engineered Solutions Ltd, by 67% in Wälischmiller
Engineering GmbH, by 91% in Carrs Billington Agriculture (Sales) Ltd, by 47% in Carr’s Engineering Ltd – Chirton profit centre, by 96% in Carrs
Agriculture Ltd – UK feed blocks and by 91% in Animax Ltd.
1
Earnings before interest and tax
104
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
12 Property, plant and equipment
Cost
At 2 September 2018
Exchange differences
Subsidiaries acquired
Additions
Disposals
Reclassifications
At 31 August 2019
Exchange differences
Additions
Transfers to right-of-use assets
Transfers from right-of-use assets
Disposals
Reclassifications
At 29 August 2020
Accumulated depreciation and impairment
At 2 September 2018
Exchange differences
Charge for the year
Disposals
At 31 August 2019
Exchange differences
Charge for the year
Impairment during the year
Transfers to right-of-use assets
Transfers from right-of-use assets
Disposals
At 29 August 2020
Net book amount
At 1 September 2018
At 31 August 2019
At 29 August 2020
Strategic Report
Governance
Financial Statements
Group
Company
Land and
buildings
£’000
Plant and
equipment
£’000
Assets in the
course of
construction
£’000
Total
£’000
Plant and
equipment
£’000
28,225
366
1,405
626
—
1,796
32,418
(534)
502
—
—
(145)
893
45,369
763
811
4,796
(3,187)
104
48,656
(1,100)
1,815
(5,730)
672
(2,488)
(292)
1,682
17
—
944
—
(1,942)
701
(5)
4,045
—
—
—
(598)
75,276
1,146
2,216
6,366
(3,187)
(42)
81,775
(1,639)
6,362
(5,730)
672
(2,633)
3
33,134
41,533
4,143
78,810
7,372
118
983
—
8,473
(231)
1,101
—
—
—
(88)
29,420
530
3,821
(2,386)
31,385
(831)
3,227
239
(1,138)
272
(1,858)
9,255
31,296
—
—
—
—
—
—
—
—
—
—
—
—
36,792
648
4,804
(2,386)
39,858
(1,062)
4,328
239
(1,138)
272
(1,946)
40,551
20,853
15,949
1,682
38,484
23,945
17,271
701
41,917
23,879
10,237
4,143
38,259
605
—
—
46
(11)
—
640
—
—
—
—
(1)
—
639
450
—
43
(11)
482
—
40
—
—
—
(1)
521
155
158
118
Transfers to right-of-use assets represent finance leased assets being transferred from property, plant and equipment on transition to
IFRS 16. Transfers from right-of-use assets represent finance leased assets that became owned assets on maturity of the lease term.
Carr’s Group plc Annual Report and Accounts 2020
105
12 Property, plant and equipment continued
Freehold land amounting to £3,025,704 (2019: £2,994,878) has not been depreciated.
Under the Group’s banking facilities the lenders have legal charges over certain properties together with floating charges over the assets
of certain businesses. The net book amount of specific assets held under legal charges at the balance sheet date was £1,450,000 (2019:
£1,504,000).
Included in the above table in respect of assets held under floating charges are assets with a net book amount of £7,653,000 (2019:
£7,668,000). This excludes specific assets under legal charge which are separately disclosed above.
Depreciation is recognised within the Consolidated Income Statement as shown below:
Cost of sales
Distribution costs
Administrative expenses
13 Right-of-use assets and lease liabilities
Amounts recognised in the balance sheet
The balance sheet shows the following amounts relating to leases:
Cost
At 31 August 2019
Transition to IFRS 16 (note 37)
Exchange differences
Additions
Transfers to property, plant and equipment
Transfers from property, plant and equipment
Disposals
At 29 August 2020
Accumulated depreciation
At 31 August 2019
Exchange differences
Charge for the year
Transfers to property, plant and equipment
Transfers from property, plant and equipment
Disposals
At 29 August 2020
Net book amount
At 31 August 2019
At 29 August 2020
Group
Company
2020
£’000
3,276
10
1,042
2019
£’000
3,696
8
1,100
4,328
4,804
2020
£’000
—
—
40
40
2019
£’000
—
—
43
43
Group
Company
Land and
buildings
£’000
Plant,
equipment
and vehicles
£’000
Plant,
equipment
and vehicles
£’000
Total
£’000
—
10,096
(74)
195
—
—
(622)
—
1,398
(1)
2,228
(672)
5,730
(273)
—
11,494
(75)
2,423
(672)
5,730
(895)
9,595
8,410
18,005
—
(11)
1,187
—
—
(85)
—
—
1,275
(272)
1,138
(83)
—
(11)
2,462
(272)
1,138
(168)
1,091
2,058
3,149
—
—
—
8,504
6,352
14,856
—
267
—
429
—
—
(205)
491
—
—
96
—
—
(62)
34
—
457
Transfers from property, plant and equipment represent finance leased assets being transferred to right-of-use assets on transition to
IFRS 16. Transfers to property, plant and equipment represent finance leased assets that became owned assets on maturity of the lease
term.
106
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
13 Right-of-use assets and lease liabilities continued
Lease liabilities
Current liabilities
Non-current liabilities
Strategic Report
Governance
Financial Statements
Group
£’000
Company
£’000
2,778
11,171
13,949
97
354
451
Finance lease liabilities recognised on the balance sheet under IAS 17 in the comparative year are included within borrowings on the balance
sheet.
The remaining contractual maturities of the lease liabilities, which are gross and undiscounted, are as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation
(Profit)/loss on disposal
Interest expense
Short-term leases and low-value assets
Group
£’000
Company
£’000
3,204
2,359
1,830
1,298
992
8,512
18,195
105
111
87
87
87
—
477
Group
£’000
Company
£’000
2,462
(37)
483
111
3,019
96
4
8
—
108
There is no expense recognised in the income statement in respect of variable lease payments that are not included in the measurement
of the leases liabilities.
The total Group cash outflow for leases in the year ended 29 August 2020 was £3,654,000. The total Company cash outflow for leases in
the year ended 29 August 2020 was £122,000.
The Group receives income on one right-of-use property sublease. A maturity analysis of lease payments, showing the undiscounted
lease payments to be received on an annual basis is as follows:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
The Company has no income arising from leases.
Group
£’000
71
71
71
71
71
27
382
Carr’s Group plc Annual Report and Accounts 2020
107
14 Investment property
Group
Cost
At 2 September 2018, 31 August 2019 and 29 August 2020
Accumulated depreciation
At 2 September 2018
Charge for the year
At 31 August 2019
Charge for the year
At 29 August 2020
Net book amount
At 1 September 2018
At 31 August 2019
At 29 August 2020
Total
£’000
299
129
6
135
6
141
170
164
158
The fair value of investment properties at 29 August 2020 is £360,000 (2019: £360,000). Investment properties were valued by
independent professionally qualified valuers in October 2016. The Directors are satisfied that there has been no significant change in fair
value since that date.
There is no investment property in the Company (2019: none).
15 Investments
Group
Cost
At 2 September 2018
Exchange difference
Share of post-tax result
Share of (losses)/gains recognised directly in equity
Dividend paid by associate and joint ventures
At 31 August 2019
Exchange difference
Share of post-tax result
Share of gains/(losses) recognised directly in equity
Dividend paid by associate and joint ventures
At 29 August 2020
Accumulated provision for impairment
At 2 September 2018, 31 August 2019 and 29 August 2020
Net book amount
At 1 September 2018
At 31 August 2019
At 29 August 2020
Other investments comprise shares in several private limited companies.
108
Carr’s Group plc Annual Report and Accounts 2020
Associate
£’000
13,129
—
924
(73)
(588)
13,392
—
1,191
312
(588)
Joint
ventures
£’000
Other
investments
£’000
8,004
194
1,453
143
(123)
9,671
(238)
1,442
(211)
(113)
83
2
—
—
—
85
(3)
—
—
—
Total
£’000
21,216
196
2,377
70
(711)
23,148
(241)
2,633
101
(701)
14,307
10,551
82
24,940
—
—
13,129
8,004
13,392
9,671
14,307
10,551
9
74
76
73
9
21,207
23,139
24,931
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
15 Investments continued
Company
Cost
At 2 September 2018
Share-based payment charge in respect of employees of subsidiary undertakings
At 31 August 2019
Recapitalisation
Dissolution of dormant subsidiary undertakings
Share-based payment charge in respect of employees of subsidiary undertakings
At 29 August 2020
Accumulated provision for impairment
At 2 September 2018 and 31 August 2019
Dissolution of dormant subsidiary undertakings
At 29 August 2020
Net book amount
At 1 September 2018
At 31 August 2019
At 29 August 2020
Shares in
subsidiaries
£’000
Associate
£’000
Joint
ventures
£’000
Total
£’000
31,355
(23)
31,332
11,866
(6,479)
(158)
36,561
4,794
(801)
3,993
26,561
26,538
32,568
245
—
245
—
—
—
245
—
—
—
245
245
245
272
—
272
—
—
—
272
31,872
(23)
31,849
11,866
(6,479)
(158)
37,078
—
—
—
4,794
(801)
3,993
272
272
27,078
27,055
272
33,085
The recapitalisation of £11,866,000 represents the increased shareholding in a subsidiary following the capitalisation of inter-company
debt.
During the year the Company began the process of dissolving several dormant subsidiaries. They have been officially dissolved
post-year end. Details of dissolved dormant subsidiaries can be found on page 146.
16 Investment in associate
The associated undertaking at 29 August 2020 is:
Group and Company
Name
Proportion of
shares held
Ordinary
%
Country of
incorporation
Country of
operation
Activity
Carrs Billington Agriculture (Operations) Ltd
49
England
UK
Manufacture of animal feed
The investment in Carrs Billington Agriculture (Operations) Ltd is held directly by the Company. The registered office of the associate is
Cunard Building, Water Street, Liverpool L3 1EL.
The Group does not have the ability to control the financial and operating policies of its associate. The Group has a 49% shareholding
and a 43% representation on the Board of Directors of Carrs Billington Agriculture (Operations) Ltd.
The associate is accounted for using the equity method.
At the year end Carrs Billington Agriculture (Operations) Ltd had capital commitments of £nil (2019: £1,269,000). No contingent liabilities
exist within the associate.
The aggregate amounts relating to the associate, of which the Group recognises 49% in the net investment in associate, are:
Total assets
Total liabilities
Revenues
Profit after tax
2020
£’000
2019
£’000
41,031
(11,833)
121,371
2,431
43,407
(16,076)
134,758
1,885
Carr’s Group plc Annual Report and Accounts 2020
109
17 Interest in joint ventures
The joint ventures at 29 August 2020 are:
Group
Name
Crystalyx Products GmbH
Bibby Agriculture Ltd
Afgritech Ltd
Afgritech LLC
Gold-Bar Feed Supplements LLC
ACC Feed Supplement LLC
Silloth Storage Company Ltd
Equity interest
held
%
50
26
50
50
50
50
50
Country of
incorporation
Country of
operation
Germany1
Germany
England2
England2
USA3
USA4
USA5
England6
UK
UK
USA
USA
USA
UK
Activity
Manufacture of animal
feed blocks
Sale of agricultural products
Holding company
Producers of ingredients
of animal feed
Manufacture of animal
feed blocks
Manufacture of animal
feed blocks
Storage of molasses
1 Registered Office address: Industrieweg 110, 48155 Munster, Germany.
2 Registered Office address: Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.
3 Registered Office address: 810 Waterman Drive, Watertown, New York 13601, USA.
4 Registered Office address: 783 Eagle Boulevard, Shelbyville, Tennessee 37160, USA.
5 Registered Office address: 5101 Harbor Drive, Sioux City, Iowa 51111, USA.
6 Registered Office address: 3 Filers Way, Weston Gateway Business Park, Weston-Super-Mare BS24 7JP.
Crystalyx Products GmbH and Silloth Storage Company Ltd have a 31 December accounting year end.
The Company directly holds the interest in Crystalyx Products GmbH and Afgritech Ltd. Afgritech Ltd has 100% control of Afgritech LLC.
Carrs Billington Agriculture (Sales) Ltd directly holds the interest in Bibby Agriculture Ltd. Animal Feed Supplement, Inc. directly holds the
interest in Gold-Bar Feed Supplements LLC and ACC Feed Supplement LLC. Carrs Agriculture Ltd directly holds the interest in Silloth
Storage Company Ltd.
Joint ventures are accounted for using the equity method.
At the year end the joint ventures had capital commitments of £nil (2019: £291,553). No contingent liabilities exist within the joint ventures.
The aggregate amounts included in the financial statements relating to the Group’s share of joint ventures are:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Income
Expenses
Net finance cost
2020
£’000
2019
£’000
8,742
8,384
(4,977)
(1,615)
39,478
(37,666)
(88)
9,133
7,616
(5,356)
(1,739)
40,735
(38,880)
(94)
Goodwill of £17,000 arose on the investment in Silloth Storage Company Ltd. This is included in the carrying amount of the Group’s
interest in joint ventures and is not shown as a separate asset.
110
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
18 Investment in subsidiary undertakings
Name
Carrs Agriculture Ltd
Carrs Billington Agriculture (Sales) Ltd
Animal Feed Supplement, Inc.
Carr’s Supplements (NZ) Ltd
Conegar S.A.
Carr’s Engineering Ltd
Wälischmiller Engineering GmbH
Carr’s Engineering (US), Inc.
NuVision Engineering, Inc.
Carrs Properties Ltd
Carr’s International Finance Ltd
Animax Ltd
Animax NZ Ltd
Strategic Report
Governance
Financial Statements
Ordinary
Shares held
%
Country of
incorporation
Country of
operation
Activity
100
England1
England1
51
UK
USA2
100
USA
100 New Zealand3 New Zealand
100
Uruguay
100
UK
100
Germany
100
USA
100
USA
100
UK
100
UK
100
UK
Uruguay6
England1
Germany4
USA5
USA5
England1
England1
England7
100 New Zealand8 New Zealand
UK
Manufacture of
animal feed/mineral blocks and
ingredients of animal feed
Agricultural retailers
Manufacture of animal feed blocks
Distributor of animal feed blocks
Distributor of animal feed blocks
Engineering
Engineering
Holding company
Engineering
Property holding
Finance company
Manufacture of animal
health products
Distributor of animal
health products
UK Manufacture of specialist disinfectants
Engineering
UK
Clinimax Ltd
NW Total Engineered Solutions Ltd
100
100
England7
England1
1 Registered Office address: Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA.
2 Registered Office address: 101 Roanoke Avenue, Poteau, Oklahoma 74953, USA.
3 Registered Office address: 515a Wairakei Road, Burnside, Christchurch 8053, New Zealand.
4 Registered Office address: Schießstattweg 16, 88677 Markdorf, Germany.
5 Registered Office address: 2403 Sidney Street, Suite 700, Pittsburgh, Pennsylvania 15203, USA.
6 Registered Office address: Juncal 1305, Piso 18, Montevideo, Uruguay.
7 Registered Office address: Shepherds Grove West, Stanton, Bury St Edmunds, Suffolk IP31 2AR.
8 Registered Office address: RSM New Zealand (Auckland), Level 2, Building 5, 60 Highbrook Drive, East Tamaki, Auckland 2013, New Zealand.
Dormant subsidiaries are listed on page 146 of this Annual Report and Accounts.
Investments in the subsidiaries listed above are held directly by the Company with the following exceptions: Carr’s Engineering Ltd holds
100% of the investment in Wälischmiller Engineering GmbH and NW Total Engineered Solutions Ltd; Carrs Agriculture Ltd holds 100% of
the investment in Carr’s Supplements (NZ) Ltd, Conegar S.A., Animax Ltd and Clinimax Ltd; Carr’s Engineering (US), Inc. holds 100% of the
investment in NuVision Engineering, Inc.; and Animax Ltd holds 100% of the investment in Animax NZ Ltd.
Non-controlling interests in subsidiary undertakings
The following tables summarise the information relating to Carrs Billington Agriculture (Sales) Ltd, where there is a material non-
controlling interest. The amounts presented are before inter-company eliminations with other companies within the Group. The non-
controlling interest in the subsidiary was 49% in both the current and prior year.
Balance sheet
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to non-controlling interest
2020
£’000
2019
£’000
21,584
56,618
(5,087)
(41,132)
31,983
15,672
17,885
73,901
(2,290)
(57,747)
31,749
15,557
Carr’s Group plc Annual Report and Accounts 2020
111
18 Investment in subsidiary undertakings continued
Income statement and statement of comprehensive income
Revenue
Profit after tax
Profit after tax allocated to non-controlling interest
There is no other comprehensive income in the current or prior year.
Statement of cash flows
Cash flows from operating activities
Cash flows from investment activities
Cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
2020
£’000
2019
£’000
280,741 296,295
2,783
1,364
2,448
1,200
2020
£’000
10,227
(1,638)
(17,505)
(8,916)
2019
£’000
5,766
(1,441)
(3,551)
774
During the year dividends of £588,000 (2019: £588,000) were paid to the non-controlling interest.
19 Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Group
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
Assets
Liabilities
Net
2020
£’000
—
—
—
—
2019
£’000
—
—
410
410
2020
£’000
(2,727)
(1,527)
(529)
2019
£’000
(2,934)
(1,321)
(732)
2020
£’000
(2,727)
(1,527)
(529)
2019
£’000
(2,934)
(1,321)
(322)
(4,783)
(4,987)
(4,783)
(4,577)
Deferred tax net liabilities are expected to reverse after more than one year from the balance sheet date.
Movement in deferred tax during the year
Assets:
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net liabilities
At
1 September
2019
£’000
410
410
(2,934)
(1,321)
(732)
(4,987)
(4,577)
Transition to
IFRS 16
£’000
Exchange
differences
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
—
—
—
—
266
266
266
—
—
69
—
24
93
93
(410)
(410)
138
(179)
(58)
(99)
(509)
—
—
—
(27)
(29)
(56)
(56)
At
29 August
2020
£’000
—
—
(2,727)
(1,527)
(529)
(4,783)
(4,783)
Other deferred tax assets and liabilities includes deferred tax on short-term timing differences, leases, rolled over capital gains, trading
losses, capital losses, business combinations and overseas deferred tax.
112
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
19 Deferred tax assets and liabilities continued
Movement in deferred tax during the prior year
Assets:
Other
Liabilities:
Accelerated tax depreciation
Employee benefits
Other
Net liabilities
Company
Accelerated tax depreciation
Employee benefits
Other
Tax assets/(liabilities)
Movement in deferred tax during the year
Assets:
Accelerated tax depreciation
Other
Liabilities:
Employee benefits
Net liabilities
At
2 September
2018
£’000
—
—
(1,604)
(1,725)
(652)
(3,981)
(3,981)
Exchange
differences
£’000
In respect of
acquisitions
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
—
—
(56)
—
1
(55)
(55)
30
30
(1,381)
—
23
(1,358)
(1,328)
380
380
107
90
(104)
93
473
—
—
—
314
—
314
314
At
31 August
2019
£’000
410
410
(2,934)
(1,321)
(732)
(4,987)
(4,577)
Assets
Liabilities
Net
2020
£’000
22
—
140
162
2019
£’000
20
—
265
285
2020
£’000
—
(1,527)
—
2019
£’000
—
(1,321)
—
2020
£’000
22
(1,527)
140
2019
£’000
20
(1,321)
265
(1,527)
(1,321)
(1,365)
(1,036)
At
1 September
2019
£’000
Transition to
IFRS 16
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
20
265
285
(1,321)
(1,321)
(1,036)
—
1
1
—
—
1
2
(101)
(99)
(179)
(179)
(278)
—
(25)
(25)
(27)
(27)
(52)
At
29 August
2020
£’000
22
140
162
(1,527)
(1,527)
(1,365)
Carr’s Group plc Annual Report and Accounts 2020
113
19 Deferred tax assets and liabilities continued
Movement in deferred tax during the prior year
Assets:
Accelerated tax depreciation
Other
Liabilities:
Employee benefits
Net liabilities
At
2 September
2018
£’000
Recognised
in income
£’000
Recognised
in equity
£’000
16
217
233
(1,725)
(1,725)
(1,492)
4
46
50
90
90
140
—
2
2
314
314
316
At
31 August
2019
£’000
20
265
285
(1,321)
(1,321)
(1,036)
Tax of £41,000 (2019: £53,000) in respect of tax losses has not been recognised as a deferred tax asset in the Group balance sheet. The
Company has no unrecognised tax losses (2019: none).
20 Inventories
Group
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2020
£’000
13,268
2,351
25,342
2019
£’000
12,813
3,887
29,570
40,961
46,270
Inventories are stated after a provision for impairment of £1,546,000 (2019: £912,000). The amount recognised as an expense in the year in
respect of the write down of inventories is £691,000 (2019: £416,000). The amount recognised as a credit in the year in respect of reversals
of write downs of inventories is £45,000 (2019: £55,000).
The cost of inventories recognised as an expense and included in cost of sales is £341,791,000 (2019: £348,430,000).
The Company has no inventories (2019: none).
21 Contract balances
The timing of revenue recognition, billings and cash collection results in trade receivables (billed amounts), contract assets (unbilled
amounts) and customer advances and deposits (contract liabilities) on the Group’s balance sheet. For services in which revenue is
earned over time, amounts are billed in accordance with contractual terms, either at periodic intervals or upon achievement of
contractual milestones. The timing of revenue recognition is measured in accordance with the progress of delivery on a contract which
could either be in advance or in arrears of billing, resulting in either a contract asset or a contract liability.
Contract assets
At the beginning of the year
Exchange differences
Subsidiaries acquired
Transfers from contract assets recognised at the beginning of the year to receivables
Increase related to services provided in the year
At the end of the year
2020
£’000
9,466
112
—
(8,080)
6,616
2019
£’000
6,909
125
102
(5,711)
8,041
8,114
9,466
114
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
21 Contract balances continued
Contract liabilities
At the beginning of the year
Exchange differences
Subsidiaries acquired
Revenue recognised against contract liabilities at the beginning of the year
Increase due to cash received, excluding any amounts recognised as revenue during the year
At the end of the year
Strategic Report
Governance
Financial Statements
2020
£’000
1,269
(58)
—
(1,048)
898
1,061
2019
£’000
1,458
11
573
(1,601)
828
1,269
The Group has assessed expected credit losses and the loss allowance for contract balances as immaterial. The Company has no
contract assets or contract liabilities (2019: none).
22 Trade and other receivables
Current:
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Amounts owed by Group undertakings (note 36)
Amounts owed by other related parties (note 36)
Other taxes and social security receivable
Other receivables
Prepayments and accrued income
Non-current:
Amounts owed by Group undertakings (note 36)
Other receivables
Group
Company
2020
£’000
2019
£’000
2020
£’000
49,077
(1,873)
51,438
(1,285)
47,204
—
1,989
317
889
1,287
50,153
—
1,997
376
1,661
2,162
—
—
—
219
1,776
—
212
410
2019
£’000
88
—
88
33,097
1,764
13
824
399
51,686
56,349
2,617
36,185
—
20
20
—
22
22
34,735
—
34,735
16,413
—
16,413
The movement in the provision for impaired trade receivables consists of increases for additional provisions offset by receivables written
off and unused provision released back to the consolidated income statement. The provision is utilised when there is no expectation of
recovering additional cash.
During the year a charge of £652,000 (2019: credit of £316,000) has been recognised within administrative expenses in the consolidated
income statement in respect of the movement in provision for impairment of trade receivables.
For all other receivables presented above the Group has assessed expected credit losses and the loss allowance as immaterial.
Carr’s Group plc Annual Report and Accounts 2020
115
22 Trade and other receivables continued
Interest bearing, non-trading amounts owed by Group undertakings within current trade and other receivables carry interest at 4.50% or
Bank of England base rate + 2.50%. Such amounts are unsecured and repayable on demand.
Interest bearing, non-trading amounts owed by Group undertakings within non-current receivables carry interest at 4.50%, 6.25% or Bank
of England base rate + 2.50%. Such amounts are unsecured and have remaining terms of 1.5 – 2 years.
Group
The ageing of trade receivables is as follows:
Not past due
Past due 1 – 30 days
Past due 31 – 60 days
Past due 61 – 90 days
Past due 91 – 120 days
Past 121 days
Company
The ageing of trade receivables is as follows:
Past 121 days
2020
2019
Gross
£’000
Impairment
£’000
34,347
6,517
2,347
1,219
940
3,707
(109)
(28)
(21)
(15)
(12)
(1,688)
Past due
but not
impaired
£’000
N/A
6,489
2,326
1,204
928
2,019
Gross
£’000
Impairment
£’000
33,451
5,713
4,345
1,729
1,703
4,497
(193)
(20)
(47)
(40)
(47)
(938)
Past due
but not
impaired
£’000
N/A
5,693
4,298
1,689
1,656
3,559
49,077
(1,873)
12,966
51,438
(1,285)
16,895
2020
2019
Gross
£’000
Impairment
£’000
Past due
but not
impaired
£’000
Gross
£’000
Impairment
£’000
Past due
but not
impaired
£’000
—
—
—
—
—
—
88
88
—
—
88
88
In relation to trade receivables, the major source of estimation uncertainty is the recoverable value of those receivables. The judgements
applied to this include the credit quality of customers, taking into account their financial positions, past experiences and other relevant
factors. Individual customer credit limits are imposed based on these factors, and provisions for impairment are made using those
judgements. Provisions for impairment are reviewed monthly by divisional management.
Trade receivables are assessed by management for credit risk and are considered past due when a counterparty has failed to make a
payment when that payment was contractually due. Management assesses trade receivables that are past the contracted due date by
the ageing periods as presented in the tables above, consistent with how it views the credit risk of trade receivables.
A default is determined to have occurred if the Group becomes aware of evidence that it will not receive all contractual cash flows that
are due.
The maximum exposure to credit risk at the year end is the carrying value, net of provision for impairment, of each receivable. The Group
and Company do not hold any significant collateral as security (2019: none).
The carrying value of trade receivables is denominated in the following currencies:
Sterling
US Dollar
Euro
New Zealand Dollar
Other
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
41,416
1,960
2,955
870
3
46,251
1,326
2,023
544
9
47,204
50,153
—
—
—
—
—
—
88
—
—
—
—
88
116
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued 23 Current tax assets
Corporation tax recoverable
Group taxation relief
24 Cash and cash equivalents and bank overdrafts
Cash and cash equivalents per the balance sheet
Bank overdrafts (note 26)
Cash and cash equivalents per the statement of cash flows
25 Trade and other payables
Current:
Trade payables
Amounts owed to Group undertakings (note 36)
Amounts owed to other related parties (note 36)
Other taxes and social security payable
Contingent, deferred and unpaid cash consideration
Other payables
Accruals and deferred income
Non-current:
Contingent consideration
Accruals and deferred income
Strategic Report
Governance
Financial Statements
Group
Company
2020
£’000
1,535
—
1,535
2019
£’000
—
—
—
2020
£’000
1,411
543
1,954
2019
£’000
840
—
840
Group
Company
2020
£’000
2019
£’000
17,571
(7,267)
28,649
(4,354)
10,304
24,295
2020
£’000
7,984
—
7,984
2019
£’000
6,778
—
6,778
Group
Company
2020
£’000
2019
£’000
16,669
—
19,820
2,524
2,169
9,270
5,070
16,564
—
24,654
1,970
5,271
9,338
4,856
2020
£’000
550
2
—
543
—
171
394
2019
£’000
600
2
—
741
—
354
836
55,522
62,653
1,660
2,533
1,276
109
1,385
2,835
164
2,999
—
—
—
—
—
—
Amounts owed to Group undertakings and other related parties are interest free, unsecured and repayable on demand.
Trade and other payables includes deferred and contingent consideration on prior year acquisitions. After retranslation at the balance
sheet date of foreign currency denominated amounts, £2,169,000 (2019: £5,271,000) of these outstanding payables are recognised within
current liabilities and £1,276,000 (2019: £2,835,000) are recognised within non-current liabilities.
Carr’s Group plc Annual Report and Accounts 2020
117
25 Trade and other payables continued
Included within accruals and deferred income is the following in respect of government grants:
At the beginning of the year
Exchange differences
Subsidiaries acquired
Amortisation in the year
At the end of the year
Included within:
Current liabilities
Non-current liabilities
26 Borrowings
Current:
Bank overdrafts
Bank loans and other borrowings
Loans from Group undertakings (note 36)
Finance leases (IAS 17)
Non-current:
Bank loans
Finance leases (IAS 17)
Borrowings are repayable as follows:
On demand or within one year
In the second year
In the third to fifth years inclusive
Group
Company
2020
£’000
169
—
—
(55)
114
5
109
114
2019
£’000
214
(2)
11
(54)
169
5
164
169
2020
£’000
2019
£’000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
7,267
4,153
—
—
4,354
18,319
—
1,183
11,420
23,856
—
2,340
110
—
2,450
—
2,340
5,466
—
7,806
25,021
—
26,846
1,740
22,947
—
26,846
—
25,021
28,586
22,947
26,846
11,420
3,106
21,915
23,856
3,295
25,291
2,450
2,340
20,607
7,806
2,340
24,506
36,441
52,442
25,397
34,652
Group and Company borrowings are shown in the balance sheet net of arrangement fees of £181,000 (2019: £241,000) of which £60,000
(2019: £60,000) is deducted from current liabilities and £121,000 (2019: £181,000) is deducted from non-current liabilities.
The net borrowings are:
Borrowings as above
Cash and cash equivalents
Net borrowings
Net borrowings (excluding leases under IAS 17)
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
36,441
(17,571)
52,442
(28,649)
25,397
(7,984)
34,652
(6,778)
18,870
23,793
18,870
20,870
17,413
17,413
27,874
27,874
Bank loans and other borrowings includes an amount of £62,000 (2019: £14,570,000) which is secured on trade receivables and represents
the amount drawn down on an invoice discounting facility with The Royal Bank of Scotland PLC. The Company, together with certain
subsidiaries, act as guarantors on the bank loans. In addition, The Royal Bank of Scotland PLC has legal charges over certain properties.
Loans from Group undertakings are non-interest bearing. Such amounts are unsecured and repayable on demand. The bank loans are
repayable by instalments and the overdraft is repayable on demand.
Non-current bank loans includes a drawn down revolving credit facility of £18.3m (2019: £19.8m) which is repayable in November 2023. At
the year end the Group had £10.3m of undrawn revolving credit facilities (2019: £7.2m).
118
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
27 Derivatives and other financial instruments
The Group’s activities expose it to a variety of financial risks. The Board reviews and agrees policies for managing its risk. These policies
have remained unchanged throughout the year.
Currency rate risk – financial instruments by currency
Strategic Report
Governance
Financial Statements
Group
Assets
Other investments
Non-current receivables
Contract assets
Current trade and other
receivables
Current derivatives
Cash and cash
equivalents
Liabilities
Current borrowings
Current leases
Contract liabilities
Current trade and other
payables
Non-current borrowings
Non-current leases
Other non-current
2020
2019
Sterling
£’000
US
Dollar
£’000
Euro
£’000
NZ
Dollar
£’000
Other
£’000
Total
£’000
Sterling
£’000
US
Dollar
£’000
50
—
4,407
22
20
1,850
1
—
1,857
—
—
—
—
—
—
73
20
50
—
8,114 4,455
25
22
1,590
Euro
£’000
1
—
3,421
NZ
Dollar
£’000
Other
£’000
Total
£’000
—
—
—
—
—
—
76
22
9,466
43,055
—
3,182 2,972
3
—
870
—
3 50,082 46,975
3
—
—
4,239
—
2,033
—
544
—
20 53,811
—
—
10,228 4,625
2,231
487
—
17,571
18,787
7,537
1,711
592
22 28,649
57,740 9,699 7,064
1,357
3 75,863 70,267
13,413
7,166
1,136
42 92,024
9,430
2,514
377
648
264
418
1,342
—
266
47,169 3,565 2,098
6,513
18,179
—
10,869
329
302
—
—
—
161
—
—
—
161
—
—
—
11,420 22,307
2,778
—
1,061
699
141
—
401
1,408
—
169
— 52,993 53,374
— 25,021 23,759
—
—
11,171
5,311
—
—
1,864
4,827
—
—
1,276
2,835
—
—
— 105,720 102,974 5,853 8,268
2020
—
—
—
122
—
—
—
122
2019
— 23,856
—
—
1,269
—
7 60,678
— 28,586
—
—
—
2,835
7 117,224
liabilities
1,276
—
—
89,814 5,526 10,219
Company
Assets
Non-current receivables
Current trade and other receivables
Cash and cash equivalents
Liabilities
Current borrowings
Current leases
Current trade and other payables
Non-current borrowings
Non-current leases
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
Sterling
£’000
US Dollar
£’000
Euro
£’000
Total
£’000
11,329
999
6,832
15,018
1,208
634
8,388
—
518
34,735
2,207
7,984
—
24,157
6,206
16,413
1,993
120
—
9,623
452
16,413
35,773
6,778
19,160
16,860
8,906
44,926
30,363
18,526
10,075
58,964
2,450
97
1,117
18,178
354
22,196
—
—
—
—
—
—
—
—
—
4,769
—
2,450
97
1,117
22,947
354
4,769
26,965
7,806
—
1,792
22,019
—
31,617
—
—
—
—
—
—
—
—
—
4,827
—
7,806
—
1,792
26,846
—
4,827
36,444
Other taxes and social security receivable and prepayments are excluded from trade and other receivables in the tables above as they
are not financial instruments. For this same reason other taxes and social security payable is excluded from trade and other payables.
Deferred income in respect of government grants is excluded as it is not a financial liability.
Carr’s Group plc Annual Report and Accounts 2020
119
27 Derivatives and other financial instruments continued
Sensitivity analysis
The impact of a weakening or strengthening in Sterling against other currencies at the balance sheet date is shown in the table below.
The Directors consider that a 10% (2019: 10%) weakening or strengthening in Sterling against other currencies represents reasonable
possible changes.
Impact on profit after taxation
Impact on total equity
2020
2019
10%
weakening
£’000
10%
strengthening
£’000
10%
weakening
£’000
10%
strengthening
£’000
784
5,602
(641)
(4,584)
860
5,731
(703)
(4,689)
This sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis all
other variables have been held constant.
Interest rate risk
The Group finances its operations through a mixture of retained earnings and bank borrowings. The Group borrows in the desired
currencies at fixed and floating rates of interest.
Group borrowings
Bank overdrafts
Bank loans and other borrowings
Finance lease liabilities (IAS 17)
Fixed rate
Floating rate
2020
2019
Weighted
average
effective
interest rate
%
1.87
1.68
—
Weighted
average
effective
interest rate
%
2.57
2.14
2.82
£’000
7,267
29,174
—
36,441
2,483
33,958
36,441
£’000
4,354
45,165
2,923
52,442
2,923
49,519
52,442
The Group’s floating rate financial liabilities bear interest determined as follows:
Bank overdrafts
Bank loans and other borrowings
US prime rate + 1.0% margin; US prime rate + 0.5% margin; Bank of England base rate + 1.7% margin
Libor + 1.7%; Libor + 1.8%; Euribor + 1.7%; Bank of England base rate + 1.15% margin; 1.5%
Company borrowings
Bank loans
Loans from Group undertakings
Floating rate
The Company’s floating rate financial liabilities bear interest determined as follows:
Bank loans
Libor + 1.7%; Libor + 1.8%; Euribor + 1.7%
2020
2019
Weighted
average
effective
interest rate
%
1.69
—
Weighted
average
effective
interest rate
%
2.30
—
£’000
25,287
110
25,397
£’000
29,186
5,466
34,652
120
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
27 Derivatives and other financial instruments continued
Sensitivity analysis
The impact of a decrease or increase in interest rates during the year is shown in the table below. The Directors consider that a 1%
movement in interest rates represents a reasonable possible change.
Impact on profit after taxation
Impact on total equity
2020
2019
1% decrease
£’000
1% increase
£’000
1% decrease
£’000
1% increase
£’000
542
542
(542)
(542)
396
396
(396)
(396)
This sensitivity analysis is not an indication of actual results, which may materially differ. For the purposes of this sensitivity analysis all
other variables have been held constant.
Liquidity risk
The Group’s policy throughout the year has been to maintain a mix of short and medium-term borrowings. Short-term flexibility is
achieved by overdraft facilities. In addition, it is the Group’s policy to maintain committed undrawn facilities in order to provide flexibility in
the management of the Group’s liquidity.
The tables below analyse the Group and Company’s financial liabilities which will be settled on a net basis into relevant maturity
groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the tables
are the contractual undiscounted cash flows which have been calculated using spot rates at the relevant balance sheet date.
Group
Bank overdrafts
Bank loans and other borrowings
Finance lease liabilities (IAS 17)
Contract liabilities
Trade and other payables
Other non-current liabilities
Company
Bank loans
Loans from Group undertakings
Trade and other payables
2020
2019
Total
£’000
7,267
30,639
—
1,061
52,993
1,320
Within
one year
£’000
7,267
4,668
—
1,061
52,993
—
One to
two years
£’000
—
3,563
—
—
—
1,320
Two to
five years
£’000
—
22,408
—
—
—
—
Total
£’000
4,354
47,717
3,111
1,269
60,678
3,010
Within
one year
£’000
4,354
19,023
1,263
1,269
60,678
—
One to
two years
£’000
—
2,984
1,016
—
—
1,700
Two to
five years
£’000
—
25,710
832
—
—
1,310
93,280
65,989
4,883
22,408
120,139
86,587
5,700
27,852
2020
Within
one year
£’000
2,808
110
1,117
One to
two years
£’000
2,764
—
—
Total
£’000
26,629
110
1,117
Two to
five years
£’000
21,057
—
—
Total
£’000
31,739
5,466
1,792
2019
Within
one year
£’000
3,045
5,466
1,792
One to
two years
£’000
2,984
—
—
Two to
five years
£’000
25,710
—
—
27,856
4,035
2,764
21,057
38,997
10,303
2,984
25,710
The above tables exclude leases accounted for under IFRS 16. Details of the contractual undiscounted cash flows for leases under IFRS
16 can be found in note 13.
Trade and other payables in the tables above exclude other taxes and social security which do not meet the definition of financial
liabilities under IFRS 7. Deferred income in respect of government grants has also been excluded as it does not give rise to a contractual
obligation to pay cash.
Carr’s Group plc Annual Report and Accounts 2020
121
27 Derivatives and other financial instruments continued
Borrowing facilities
The Group has various undrawn facilities. The undrawn facilities available at 29 August 2020, in respect of which all conditions precedent
had been met, were as follows:
Expiring in one year or less
Expiring within two and five years inclusive
2020
Floating
rate
£’000
6,883
28,200
35,083
2019
Floating
rate
£’000
3,565
18,626
22,191
Undrawn facilities include overdraft facilities of £2.5m (2019: £2.5m) that are renewable on an annual basis.
The Company’s overdraft is within a Group facility and it is therefore not possible to determine the Company’s undrawn facilities at the
balance sheet date.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an efficient capital structure to optimise the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total equity. Net debt is
calculated as total borrowings (including current and non-current borrowings) as shown in the consolidated balance sheet less cash and
cash equivalents. Total equity is as shown in the consolidated balance sheet. At 29 August 2020 the Group had net debt of £18.9m (2019:
net debt, excluding leases, of £20.9m). Based on net debt, excluding leases, gearing was 14.1% at the year end (2019: 15.9%).
The Group monitors cash balances and net debt on a daily basis to ensure adequate headroom exists on banking facilities and that it is
compliant with banking covenants.
Fair value hierarchy
IFRS 13 requires financial instruments that are measured at fair value to be classified according to the valuation technique used:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 – inputs, other than level 1 inputs, that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices)
Level 3 – unobservable inputs
Transfers between levels are deemed to have occurred at the end of the reporting period. There were no transfers between levels in the
above hierarchy in the period.
All derivative financial instruments are measured at fair value using level 2 inputs. The Group’s bankers provide the valuations for the
derivative financial instruments at each reporting period end based on mark to market valuation techniques.
Contingent consideration is measured at fair value using level 3 inputs. Fair value is determined considering the expected payment,
which is discounted to present value. The expected payment is determined separately in respect of each individual earn-out agreement
taking into consideration the expected level of profitability of each acquisition.
The significant unobservable inputs are the projections of future profitability, which have been based on the budget for the year to
August 2021 and forecast information for future periods, and the discount rate, which has been based on the incremental borrowing rate.
A significant amount of the contingent consideration payable is included within current liabilities and has therefore not been discounted.
A reasonable change in the discount rate applied would not have a material impact on the balances recognised within non-current
liabilities.
122
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
27 Derivatives and other financial instruments continued
The following table presents a reconciliation of the contingent consideration liability measured at fair value on a recurring basis using
significant unobservable inputs (level 3).
Fair value at the beginning of the year
Exchange differences
Acquisitions in the year
Payments made to vendors
Change in fair value
Fair value at the end of the year
2020
£’000
7,954
(184)
—
(2,513)
(1,835)
3,422
2019
£’000
3,532
211
5,337
—
(1,126)
7,954
The change in fair value has been included within the credit of £937,000 shown as an adjusting item in note 5. Also included in the
adjusting item are expenses incurred by the Group related to payments made to the vendors.
Fair values of financial assets and liabilities
The fair values of Group and Company financial assets and liabilities are not materially different to book value.
Derivative financial instruments
Hedge of net investment in foreign subsidiaries
The Group hedges foreign denominated loans against its investment in foreign subsidiaries. A foreign exchange pre-tax loss of £112,000
(2019: pre-tax gain of £81,000) was recognised in equity during the year on translation of US Dollar denominated loans with a fair value of
$1,608,000 (2019: $1,608,000) to Sterling. A foreign exchange pre-tax gain of £58,000 (2019: pre-tax loss of £44,000) was recognised in
equity during the year on translation of Euro denominated loans with a fair value of €5,330,000 (2019: €5,330,000) to Sterling. The
Group’s net investment hedge was fully effective in both the current and prior year and therefore no gain or loss is recognised in the
consolidated income statement.
Currency derivatives
The Group and Company use forward foreign currency contracts to manage exchange risk exposure. At the balance sheet date, the fair
value of outstanding forward foreign currency contracts are as below:
Group
At the beginning of the year
Gains/(losses) during the year
At the end of the year – included within current assets
The Company has no forward foreign currency contracts (2019: none).
2020
2019
Fair
value
£’000
Contractual
or notional
amount
£’000
—
3
3
—
105
105
Fair
value
£’000
13
(13)
—
Contractual
or notional
amount
£’000
1,206
(1,206)
—
Carr’s Group plc Annual Report and Accounts 2020
123
27 Derivatives and other financial instruments continued
The Group uses currency swaps to manage exchange risk exposure. At the balance sheet date, the fair value of outstanding currency
swaps are as below:
Group
At the beginning of the year
Losses during the year
At the end of the year
The Company has no currency swaps (2019: none).
2020
2019
Fair
value
£’000
Contractual
or notional
amount
£’000
—
—
—
—
—
—
Fair
value
£’000
13
(13)
—
Contractual
or notional
amount
£’000
124
(124)
—
Fair value has been determined by reference to the value of equivalent forward foreign currency contracts and currency swaps at the
balance sheet date.
Gains and losses on currency related derivatives are included within administrative expenses.
28 Retirement benefits
The Group participates in two defined benefit pension schemes: Carr’s Group Pension Scheme and Carrs Billington Agriculture Pension
Scheme.
Carr’s Group Pension Scheme (Group and Company)
The Company sponsors the Carr’s Group Pension Scheme and offered a defined contribution and a defined benefit section. The assets
of the scheme are held separately from those of the Group and are invested with independent investment managers.
From 1 September 2015 the defined contribution section was closed. Members of that section were enrolled in a new defined
contribution scheme, the Carr’s Group Retirement Savings Scheme (“Carr’s Group RSS”), set up under a Master Trust arrangement.
The defined benefit section of the scheme was previously closed to new members, and has closed to future accrual with effect from 31
December 2015. Members of this section became entitled to become members of the Carr’s Group RSS from 1 January 2016. There were
no pension contributions made by the Group over the year to the defined benefit section (2019: £nil).
The following disclosures relate to the defined benefit section of the Carr’s Group Pension Scheme. The last full actuarial valuation of this
scheme was carried out by a qualified independent actuary as at 31 December 2017 and updated on an approximate basis to 29 August
2020 by a qualified independent actuary.
Major assumptions:
Inflation (RPI)
Inflation (CPI)
Rate of discount
Pension in payment increases:
RPI or 5.0% per annum if less
RPI or 5.0% per annum if less, minimum 3.0% per annum
2020
%
2.90
2.00
1.80
2.90
3.50
2019
%
3.00
2.10
1.80
3.00
3.50
124
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
28 Retirement benefits continued
The mortality tables used in the valuation as at 29 August 2020 are 100% of S2PA with allowance for mortality improvements
using CMI_2019 with a 1.25% p.a. underpin. The mortality assumptions adopted imply the following life expectancies at age 65 as at
29 August 2020:
Males currently age 45
Females currently age 45
Males currently age 65
Females currently age 65
Amounts recognised in the Income Statement in respect of defined benefit schemes:
Administrative expenses
Past service cost
Net interest on the net defined benefit asset
Total (income)/expense
At
29 August
2020
23.1 years
25.3 years
21.8 years
23.7 years
At
31 August
2019
23.2 years
25.2 years
21.8 years
23.7 years
2020
£’000
13
—
(139)
(126)
2019
£’000
21
795
(284)
532
The past service cost in the prior year of £795,000 represents the scheme actuary's estimated effect on the Group's pension scheme
liabilities following the equalisation of Guaranteed Minimum Pensions (“GMPs”). The Group continues to monitor further clarifications
arising from the High Court case of Lloyds Banking Group Pensions Trustees Ltd v Lloyds Bank plc and others. This was recognised as a
past service cost through the Income Statement and disclosed as an adjusting item in the prior year (note 5).
The (income)/expense is recognised within the Income Statement as shown below:
Within operating profit:
Administrative expenses
Within interest:
Finance income
Total (income)/expense
Remeasurements of the net defined benefit asset to be shown in the Statement of Comprehensive Income:
Actual gains and losses arising from changes in:
Financial assumptions
Demographic assumptions
Return on assets, excluding interest income
Total remeasurement of the net defined benefit asset
2020
£’000
13
(139)
(126)
2020
£’000
422
173
(453)
142
2019
£’000
816
(284)
532
2019
£’000
(9,373)
589
6,939
(1,845)
Carr’s Group plc Annual Report and Accounts 2020
125
28 Retirement benefits continued
Amounts included in the Balance Sheet:
Present value of funded defined benefit obligations
Fair value of scheme assets
Surplus in funded scheme
Reconciliation of opening and closing balances of the present value of the defined benefit obligation:
Benefit obligation at the beginning of the year
Past service cost
Interest cost
Net measurement (gains)/losses – financial
Net measurement gains – demographic
Benefits paid
Benefit obligation at the end of the year
Benefit obligation by participant status:
Vested deferreds
Retirees
Reconciliation of opening and closing balances of the fair value of scheme assets:
Fair value of scheme assets at the beginning of the year
Interest income on scheme assets
Return on assets, excluding interest income
Benefits paid
Scheme administrative cost
Fair value of scheme assets at the end of the year
Analysis of the scheme assets and actual return:
Equity instruments
Property
Bonds
Cash
Other
Actual return on scheme assets
126
Carr’s Group plc Annual Report and Accounts 2020
2020
£’000
2019
£’000
(65,834)
73,871
(68,037)
75,806
8,037
7,769
2020
£’000
2019
£’000
68,037
—
1,199
(422)
(173)
(2,807)
60,488
795
1,642
9,373
(589)
(3,672)
65,834
68,037
2020
£’000
2019
£’000
22,615
43,219
22,930
45,107
65,834
68,037
2020
£’000
2019
£’000
75,806
1,338
(453)
(2,807)
(13)
70,634
1,926
6,939
(3,672)
(21)
73,871
75,806
Fair value of assets
2020
£’000
11,563
2,328
52,274
5,360
2,346
2019
£’000
11,753
2,388
57,153
70
4,442
73,871
75,806
885
8,865
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
28 Retirement benefits continued
Equity instruments, bonds and 'other' assets are held in unquoted Mercer fund portfolios and are not held directly by the Pension
Scheme. These Mercer portfolios in turn invest in a mix of quoted and unquoted underlying assets. Property assets are held by Legal &
General Investment Management. 'Other' assets relate to assets held in the Mercer's Alternative Strategies funds within the Scheme's
growth portfolio. Cash includes investments in UK Cash Funds within the Mercer fund portfolios.
In accordance with IAS 19 Scheme assets must be valued at the fair value at the balance sheet date. The following applies to the assets
in the Scheme:
Asset
Equity instruments
Property
Bonds
Other
Valuation
Fair value being the net asset value provided by the investment manager
Closing bid price for unit holdings in managed property fund
Fair value being the net asset value provided by the investment manager
Fair value being the net asset value provided by the investment manager
Sensitivity analysis
A sensitivity analysis of the principal assumptions used to measure the scheme liabilities:
Discount rate
Price inflation rate
Post-retirement mortality assumption
Change in assumption
-25 basis points
+25 basis points
-25 basis points
+25 basis points
-1 year age rating
+1 year age rating
Present value of defined
benefit obligation
£’000
68,468
63,349
64,315
67,162
68,603
63,123
The sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. It is not an indication of
actual results which may materially differ, for example, changes in some assumptions may actually be correlated. When calculating the
sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit
obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the
defined benefit liability recognised in the balance sheet.
The methodology and principal assumptions used in preparing the sensitivity analysis did not change compared to the prior year.
The weighted average duration of the defined benefit obligation is approximately 16 years (2019: 16-17 years).
Expected cash flows for the following year:
Expected employer contributions
Expected contributions to reimbursement rights
Expected total benefit payments by the scheme:
Year 1
Year 2
Year 3
Year 4
Year 5
Next 5 years
£’000
—
—
2,885
2,966
3,048
3,133
3,220
17,494
Carr’s Group plc Annual Report and Accounts 2020
127
28 Retirement benefits continued
Characteristics and the risks associated with the Scheme
Information about the characteristics of the Scheme:
The Scheme provides pensions in retirement and death benefits to members. Pension benefits are linked to a member’s final salary at 31
December 2015 (or date of leaving, if earlier) and their length of service. Since 31 December 2015 the Scheme has been closed to future
accrual.
The Scheme is a registered scheme under UK legislation.
The Scheme is subject to the scheme funding requirements outlined in UK legislation. As at 31 December 2017, being the date of the
most recent finalised actuarial valuation, the scheme funding valuation of the Scheme revealed a surplus of £7.7m equating to a funding
level of 112%. On a solvency basis the scheme had a deficit of £18.8m equating to a funding level of 80%. The purpose of the scheme
funding valuation is to monitor the progress towards achieving the Trustees’ funding objectives and to determine the past service
contributions and future service contributions that may be required. The solvency valuation provides an indication of the financial impact
on members were the scheme to wind up with no money recoverable from the employer. The Trustees agreed that deficit contributions
were not required and therefore contributions to the Scheme by the Group and Company in the year ending August 2021 are expected to
be £nil. The next full triennial actuarial valuation will be as at 31 December 2020 at which point the funding requirements will be revisited.
The Scheme was established under trust and is governed by the Scheme’s trust deed and rules dated June 2008. The Trustees are
responsible for the operation and the governance of the Scheme, including making decisions regarding the Scheme’s funding and
investment strategy in conjunction with the Company.
Risk exposure and investment strategy
The Scheme’s investment strategy is to invest in return-seeking assets and lower risk assets, such as bonds. This strategy reflects the
Scheme’s liability profile and the Trustees’ attitude to risk. The objective is to achieve a 110% funding level on a gilts +0.25% p.a. basis by
2026. The Trustees have a fiduciary management arrangement with Mercer who have certain delegated responsibilities over investment
decisions within parameters set by the Trustees. These parameters are reviewed on a regular basis to ensure they are still appropriate.
Assets are invested in Mercer portfolios and in respect of property, Legal & General Investment Management. The Scheme aims to
reduce risks such as market (investment) risk, interest rate risk, inflation risk, currency risk and longevity risk through liability hedging,
diversification and de-risking triggers. Where de-risking triggers are met, assets are transferred from growth asset portfolios to matching
asset portfolios. The objective of the matching asset portfolio is to manage the impact on the funding level of interest rate risk and
inflation risk such that the majority of the Scheme’s risk is allocated to the growth portfolio.
Carr’s Group Retirement Savings Scheme
The Company offers membership in a Master Trust arrangement, Carr’s Group RSS, following the closure of both sections of the Carr’s
Group Pension Scheme. The pension expense for this scheme for the year was £1,815,000 (2019: £1,647,000).
Carrs Billington Agriculture Pension Scheme
One of the Group’s subsidiaries, Carrs Billington Agriculture (Sales) Ltd, is a participating employer in the Carrs Billington Agriculture
Pension Scheme, which is a multi-employer defined benefit pension scheme. For the reasons explained below this scheme is accounted
for as a defined contribution scheme.
The scheme is closed to new entrants and has been closed to future accrual since 1 December 2007. There is currently a surplus,
calculated in accordance with IAS 19, of £3.5m (2019: £1.9m). The sponsoring employer, Carrs Billington Agriculture (Operations) Ltd, is
currently paying £0.8m per annum under the terms of the recovery plan agreed between them and the Trustees of the scheme.
Under the rules of the scheme, any employer wishing to exit the scheme would trigger a partial wind-up of the scheme and would
therefore be responsible for their s75 debt. A full wind-up of the plan would also trigger s75 debts for each participating employer.
128
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued Strategic Report
Governance
Financial Statements
28 Retirement benefits continued
The history of the scheme is that it was brought together from many other pension schemes and employers following multiple
acquisitions over several years. Many of those acquisitions had little or no records of employee histories. Because of this, approximately
85% of the scheme liabilities are ‘orphan liabilities’. Under the rules of the scheme, on a wind-up the orphan liabilities would be split
between the participating employers in the same proportion as their calculated share of non-orphan liabilities. At the last finalised
actuarial valuation, the buy-out deficit was £13.7m and the Group’s estimated liability on the wind-up of the scheme was £6.6m.
Because of the scheme history described above, it is not possible to calculate the Group’s share of the assets and liabilities of the
scheme, and consequently despite it being a defined benefit pension scheme, the Group treats it as a defined contribution pension
scheme for accounting purposes. The Group does not expect to pay any contributions to the scheme in the next reporting period (2019:
£nil). Currently the deficit repair contributions are being funded solely by the sponsoring employer and this is expected to remain the
case in the future. Those deficit repair contributions are based on the last finalised triennial valuation of the scheme as at 31 December
2018, which showed that the scheme had a deficit of £2.6m on a technical provisions basis.
The Group’s level of participation in the scheme is estimated at 48.5%, which is based on its estimated share of the total buy-out
liabilities. The Group has a 49% shareholding in its associate company which is the sponsoring company of the pension scheme. As a
result of equity accounting for its share of the net assets of the associate, the Group recognises 49% of the surplus calculated on an IAS
19 accounting basis within ‘Investment in associate’ in its consolidated balance sheet.
Included in the Group's 'Share of post-tax results of associate' in the prior year is £306,000 in respect of the effect of the GMP
equalisation on the Carrs Billington Agriculture Pension Scheme's liabilities. This was disclosed as an adjusting item (note 5).
Other pension schemes
The pension expense in respect of defined contribution pension arrangements in foreign subsidiaries during the year was £581,000
(2019: £526,000).
Pension contributions into NEST during the year amounted to £95,000 (2019: £84,000).
The Group also pays contributions into various defined contribution schemes acquired through business combinations. The pension
expense during the year in respect of these schemes was £31,000 (2019: £64,000).
29 Share capital
Group and Company
Shares
£’000
Shares
£’000
Allotted and fully paid Ordinary Shares of 2.5p each:
At the beginning of the year
Allotment of shares
At the end of the year
91,942,005
523,828
2,299
13
91,403,112
538,893
92,465,833
2,312
91,942,005
2,285
14
2,299
2020
2019
The table above includes 41,352 (2019: 3) shares held in the Employee Share Trust.
The consideration received on the allotment of shares during the year was £23,688 (2019: £37,787).
For details of share-based payment schemes see note 30.
Carr’s Group plc Annual Report and Accounts 2020
129
30 Share-based payments
Group
The Group operates three active share-based payment schemes at 29 August 2020.
The Executive Directors participate in a deferred bonus share plan under which 25% of any bonus earned will be deferred into awards
over shares in the Company, with awards subject to a two-year post-vesting holding period.
Under the Long Term Incentive Plan shares will be awarded to eligible individuals subject to an earnings per share (“EPS”) target
measured against average annual increases over a three-year period. For the awards granted in December 2017, December 2018 and
November 2019 an average annual growth of EPS must exceed 3.0% for 25% of the awards to vest and 100% vest at 10.0%, with a
straight-line calculation between 25% and 100% of the award.
All employees, subject to eligibility criteria, may participate in the Share Save Scheme. Under this scheme employees are offered
savings contracts for three-year vesting period plans. The exercise period is six months from the vesting date.
The fair value per option granted and the assumptions used in the calculation of fair values for Long Term Incentive Plans and Share
Save Schemes are as follows:
Grant date
Share price at grant date (weighted
average)
Exercise price (weighted average)
Fair value per option at grant
Number of employees at grant
Shares under option at grant
Vesting period (years)
Model used for valuation
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a
dividend yield
Expectations of vesting
Long Term
Incentive Plan
November 2019
Long Term
Incentive Plan
December 2018
Long Term
Incentive Plan
December 2017
Share Save
Scheme
(3-Year Plan
2020)
Share Save
Scheme
(3-Year Plan
2019)
Share Save
Scheme
(3-Year Plan
2018)
11/11/19
19/12/18
22/12/17
16/12/19
17/12/18
18/12/17
£1.240
£0.00
£1.119
7
611,596
3
£1.43
£0.00
£1.277
8
610,464
3
£1.485
£0.00
£1.348
8
579,788
3
£1.44
£1.275
£0.36
153
420,851
3
Market value* Market value* Market value* Black-Scholes Black-Scholes
34.8%
3.65
3.4
0.81%
£1.565
£1.223
£0.46
157
508,407
3
36.4%
3.65
3.4
0.61%
—
10
6.5
—
—
10
6.5
—
—
10
6.5
—
£1.20
£1.061
£0.28
290
1,465,455
3
Binomial
32.7%
3.5
3.25
0.6%
2.33%
0%
2.05%
0%
1.68%
50%
3.04%
95%
2.56%
95%
2.7%
95%
* Discounted for dividends forgone over the three-year vesting period.
The fair value of the deferred bonus plan offered to the Executive Directors is calculated with reference to the market value of the shares
under award discounted to reflect illiquidity during the post vesting two-year period.
The expected volatility has been calculated using historical daily data over a term commensurate with the expected life of each option.
The expected life is the midpoint of the exercise period. The risk-free rate of return is the implied yield of zero-coupon UK Government
bonds with a remaining term equal to the expected term of the award being valued.
130
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
30 Share-based payments continued
Number of options (LTIP and Share Save)
Outstanding:
At 2 September 2018
Granted in the year
Exercised in the year
Forfeited in the year
At 31 August 2019
Granted in the year
Exercised in the year
Forfeited in the year
At 29 August 2020
Exercisable:
At 31 August 2019
At 29 August 2020
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
Long Term
Incentive Plan
November 2019
Number ’000
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Long Term
Incentive Plan
November 2016
Number ’000
Share Save
Scheme (3-Year
Plan 2020)
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
Share Save
Scheme (3-Year
Plan 2018)
Number ’000
—
—
—
—
—
610
—
—
610
—
—
9
—
580
—
—
580
—
—
—
580
—
—
8
612
—
—
—
612
—
—
—
612
—
—
7
542
—
—
—
542
—
(514)
(28)
—
—
—
6
—
—
—
—
—
508
—
(57)
451
—
—
—
421
—
(43)
378
—
—
(52)
326
—
—
1,337
—
(8)
(140)
1,189
—
(10)
(192)
987
—
—
3.07
2.07
0.83
5.50
4.50
3.50
2.50
2.82
1.82
0.58
The total (credit)/charge recognised for the year arising from share-based payments are as follows:
Deferred Bonus Share Plan 2019
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
2020
£’000
(13)
(175)
(121)
—
—
55
42
75
—
(137)
2019
£’000
75
175
228
227
22
—
32
113
8
880
Carr’s Group plc Annual Report and Accounts 2020
131
30 Share-based payments continued
Company
The movement in the number of outstanding options under the share schemes for the Company is shown below.
Number of options (LTIP and Share Save)
Outstanding:
At 2 September 2018
Granted in the year
Exercised in the year
Forfeited in the year
At 31 August 2019
Granted in the year
Exercised in the year
Forfeited in the year
At 29 August 2020
Exercisable:
At 31 August 2019
At 29 August 2020
Weighted average:
Remaining contractual
life (years)
Remaining expected
life (years)
Long Term
Incentive Plan
November 2019
Number ’000
Long Term
Incentive Plan
December 2018
Number ’000
Long Term
Incentive Plan
December 2017
Number ’000
Long Term
Incentive Plan
November 2016
Number ’000
Share Save
Scheme (3-Year
Plan 2020)
Number ’000
Share Save
Scheme (3-Year
Plan 2019)
Number ’000
Share Save
Scheme (3-Year
Plan 2018)
Number ’000
—
—
—
—
—
443
—
—
443
—
—
9
—
470
—
—
470
—
—
—
470
—
—
8
486
—
—
—
486
—
—
—
486
—
—
7
381
—
—
—
381
—
(379)
(2)
—
—
—
6
—
—
—
—
—
42
—
—
42
—
—
—
58
—
—
58
—
—
(23)
35
—
—
203
—
—
(5)
198
—
—
(42)
156
—
—
3.07
2.07
0.83
5.50
4.50
3.50
2.50
2.82
1.82
0.58
The total (credit)/charge recognised for the year arising from share-based payments are as follows:
Deferred Bonus Share Plan 2019
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
2020
£’000
(13)
(133)
(80)
—
—
12
7
18
—
(189)
2019
£’000
75
133
181
168
22
—
4
17
2
602
Share-based payments awarded to employees of subsidiary undertakings and recognised as an investment in subsidiary undertakings
in the Company are as follows:
Long Term Incentive Plan December 2018
Long Term Incentive Plan December 2017
Long Term Incentive Plan November 2016
Long Term Incentive Plan November 2015
Share Save Scheme (3-Year Plan 2020)
Share Save Scheme (3-Year Plan 2019)
Share Save Scheme (3-Year Plan 2018)
Share Save Scheme (5-Year Plan 2014)
Total carrying amount of investments
132
Carr’s Group plc Annual Report and Accounts 2020
2020
£’000
—
53
—
—
33
49
191
—
2019
£’000
43
94
178
—
—
21
146
2
326
484
Notes to the Financial Statementscontinued
31 Cash generated from/(used in) continuing operations
Profit for the year from continuing operations
Adjustments for:
Tax
Tax credit in respect of R&D
Dividends received from subsidiaries
Dividends received from associate
Depreciation and impairment of property, plant and equipment
Depreciation of right-of-use assets
Depreciation of investment property
Intangible asset amortisation
Loss/(profit) on disposal of property, plant and equipment
(Profit)/loss on disposal of right-of-use assets
Loss on dissolution of dormant subsidiaries
Business combination expenses
Adjustments to contingent consideration
Net fair value (credit)/charge on share-based payments
Release of loan provision
Other non-cash adjustments
Finance costs:
Interest income
Interest expense and borrowing costs
Share of results of associate and joint ventures
IAS 19 income statement charge (excluding interest):
Administrative expenses (note 28)
Past service cost (note 28)
Changes in working capital (excluding the effects of acquisitions):
Decrease/(increase) in inventories
Decrease/(increase) in receivables
(Decrease)/increase in payables
Strategic Report
Governance
Financial Statements
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
10,922
13,624
6,739
6,768
1,575
(250)
—
—
4,567
2,462
6
1,513
265
(37)
—
—
(937)
(137)
(783)
(504)
2,685
(526)
—
—
4,804
—
6
943
(30)
—
—
509
(1,126)
880
—
(139)
(313)
1,716
(2,633)
(463)
1,399
(2,377)
13
—
21
795
4,811
3,862
(3,479)
(670)
(1,008)
(3,323)
(264)
—
(14,016)
(588)
40
96
—
42
—
4
5,337
—
—
(189)
—
1,624
(1,911)
750
—
13
—
—
637
(834)
(89)
—
(6,805)
(588)
43
—
—
41
—
—
—
—
—
602
—
(1,384)
(2,055)
666
—
21
795
—
(804)
202
Cash generated from/(used in) continuing operations
22,639
16,004
(2,520)
(2,587)
32 Analysis of net debt
Group
Cash and cash equivalents
Bank overdrafts
Loans and other borrowings:
– Current
– Non-current
Net debt (excluding finance lease liabilities – IAS 17)
Finance leases (IAS 17):
– Current
– Non-current
Net debt (including finance lease liabilities – IAS 17)
At
1 September
2019
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
29 August
2020
£’000
28,649
(4,354)
(10,089)
(2,913)
24,295
(13,002)
—
—
—
(989)
—
17,571
(7,267)
(989)
10,304
(18,319)
(26,846)
13,615
1,463
(20,870)
2,076
528
(60)
468
23
422
(4,153)
(25,021)
(544)
(18,870)
(1,183)
(1,740)
(23,793)
Other non-cash changes relate to the release of a loan forgiven by the lender and the release of deferred borrowing costs to the
consolidated income statement.
Carr’s Group plc Annual Report and Accounts 2020
133
32 Analysis of net debt continued
Company
Cash and cash equivalents
Loans and other borrowings:
– Current
– Non-current
Net debt
At
1 September
2019
£’000
Cash flow
£’000
Other
non-cash
changes
£’000
Exchange
movements
£’000
At
29 August
2020
£’000
6,778
1,246
—
(40)
7,984
(7,806)
(26,846)
(110)
3,900
5,466
(60)
—
(2,450)
59 (22,947)
(27,874)
5,036
5,406
19
(17,413)
Other non-cash changes relate to loans eliminated on dissolution of dormant subsidiaries and the release of deferred borrowing costs to
the consolidated income statement.
33 Capital commitments
Group
Capital expenditure on property, plant and equipment that has been contracted for but has not been provided for
in the accounts
The Company has no capital commitments (2019: none).
34 Other financial commitments
Group
The Group had commitments under non-cancellable operating leases as follows:
2020
£’000
2019
£’000
860
173
Within one year
Within two and five years inclusive
After five years
Group
Company
2020
2019
2020
2019
Land and
buildings
£’000
—
—
—
—
Other
£’000
—
—
—
—
Land and
buildings
£’000
1,379
3,514
6,556
Other
£’000
634
805
29
11,449
1,468
Other
£’000
—
—
—
—
Other
£’000
87
177
—
264
The table above excludes leases accounted for under IFRS 16 ‘Leases.’ Details of contractual undiscounted cash flows for leases under
IFRS 16 can be found in note 13.
35 Financial guarantees and contingent liabilities
The Company, together with certain subsidiary undertakings, has entered into a guarantee with Clydesdale Bank PLC in respect
of the Group loans, overdraft, asset finance and guarantee facilities with that bank, which at 29 August 2020 amounted to £5,973,000
(2019: £2,582,000).
Certain subsidiary undertakings utilise guarantee facilities with financial institutions which include their own bankers. These financial
institutions in the normal course of business enter into certain specific guarantees with some of the subsidiaries’ customers. All these
guarantees allow the financial institutions to have recourse to the subsidiaries if a guarantee is enforced. The total outstanding of such
guarantees at 29 August 2020 was £5,635,000 (2019: £4,386,000).
The Company has provided specific guarantees to certain customers of subsidiaries. These are in place to guarantee the completion of
the contract in any event. The contracts under these guarantees had a total contract value of £14,314,000 (2019: £14,070,000) and as at 29
August 2020 £933,000 (2019: £1,572,000) remained uncompleted.
The Company has provided a guarantee over the lease of a premises occupied by a subsidiary. The guarantee is in respect of prompt
and full payment of rents due throughout the term of the lease. As at 29 August 2020 the cumulative rent payable over the remaining
term of the lease is £932,000 (2019: £1,040,000).
134
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Strategic Report
Governance
Financial Statements
35 Financial guarantees and contingent liabilities continued
The Company has entered into a guarantee with the Trustees of the Carrs Billington Agriculture Pension Scheme in respect of the
punctual payment of obligations due to the pension scheme by the participating employers of the scheme. The Company’s total liability
shall not exceed £1,500,000 (2019: £1,500,000).
One of the Group’s subsidiary undertakings is a participating employer in the Carrs Billington Agriculture Pension Scheme. On a wind-up
of the scheme the buy-out deficit would be split between the participating employers with the Group’s level of participation
in the scheme estimated at 48.5%. At the last actuarial valuation, the Group’s estimated liability on the wind-up of the scheme was £6.6m
(2019: £7.6m).
The Group and Company do not expect any of the above to be called in.
36 Related parties
Group and Company
Identity of related parties
The Group has a related party relationship with its subsidiaries, associate and joint ventures and with its Directors.
Transactions with key management personnel
Key management personnel are considered to be the Directors and their remuneration is disclosed within the Remuneration Committee
Report.
Balances reported in the Balance Sheet
Amounts owed by businesses controlled by key management personnel (in a
trading capacity):
Trade receivables
Transactions reported in the Income Statement
Revenue
Transactions with subsidiaries
Balances reported in the Balance Sheet
Amounts owed by subsidiary undertakings:
Loans
Other receivables
Amounts owed to subsidiary undertakings:
Loans
Other payables
Transactions reported in the Income Statement
Management charges receivable
Dividends received
Interest receivable
Purchases
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
104
474
18
72
—
—
—
—
Company
2020
£’000
2019
£’000
34,735
219
49,231
279
34,954
49,510
(110)
(2)
(112)
(5,466)
(2)
(5,468)
2,857
14,016
1,653
(1)
2,967
6,805
1,725
(1)
Carr’s Group plc Annual Report and Accounts 2020
135
36 Related parties continued
Transactions with associate
Balances reported in the Balance Sheet
Amounts owed by associate:
Trade and other receivables
Amounts owed to associate:
Trade and other payables
Transactions reported in the Income Statement
Revenue
Rental income
Management charges receivable
Dividends received
Management charges payable
Purchases
Transactions with joint ventures
Balances reported in the Balance Sheet
Amounts owed by joint ventures:
Trade and other receivables
Amounts owed to joint ventures:
Trade and other payables
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
246
185
169
(19,815)
(24,628)
—
514
20
106
—
(253)
(106,072)
695
20
166
—
(153)
(116,074)
—
—
106
588
—
—
45
—
—
—
113
588
—
—
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
1,639
1,794
1,607
1,719
(5)
(3)
—
—
Included within Group and Company trade and other receivables is £1,605,000 (2019: £1,717,000) in respect of loans owed by joint
ventures.
Transactions reported in the Income Statement
Revenue
Management charges receivable
Purchases
Group
Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
417
166
(200)
836
165
(310)
—
—
—
—
—
—
Other related parties
NW Total Engineered Solutions Ltd occupies its premises under a 15-year lease with Ironworks Properties LLP. The owners of Ironworks
Properties LLP are employed by NW Total Engineered Solutions Ltd. This lease was accounted for under IFRS 16 on the transition date of
1 September 2019, and at 29 August 2020 the liability included in the consolidated balance sheet was £1,114,000. Lease payments made
in the year were £98,000. At the prior year end, under IAS 17, £23,000 was owed to Ironworks Properties LLP.
136
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued Strategic Report
Governance
Financial Statements
37 Adoption of IFRS 16 ‘Leases’
The Group adopted IFRS 16 with effect from 1 September 2019 and has applied IFRS 16 using the modified retrospective approach with
the cumulative effect of initially applying the standard recognised at the date of initial application. Comparative information has not been
restated and is therefore still reported under IAS 17.
Adjustments to the opening balance sheet arising from the adoption of IFRS 16 are as follows.
Non-current assets
Property, plant and equipment
Right-of-use assets
Current assets
Trade and other receivables
Current liabilities
Borrowings
Leases
Trade and other payables
Non-current liabilities
Borrowings
Leases
Deferred tax liabilities
Equity
Retained earnings
Non-controlling interests
Headline figures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total shareholders’ equity
Total equity
31 August
2019
£’000
41,917
—
Adjustments
£’000
1 September
2019
£’000
(4,409)
15,903
37,508
15,903
56,349
(776)
55,573
(23,856)
—
(62,653)
(28,586)
—
(4,987)
94,864
16,740
115,616
140,734
256,350
(88,788)
(36,572)
(125,360)
130,990
114,250
130,990
1,183
(2,801)
229
1,740
(12,777)
266
(22,673)
(2,801)
(62,424)
(26,846)
(12,777)
(4,721)
(931)
(511)
93,933
16,229
11,494
(776)
10,718
(1,389)
(10,771)
(12,160)
(1,442)
(931)
(1,442)
127,110
139,958
267,068
(90,177)
(47,343)
(137,520)
129,548
113,319
129,548
The adjustments to the opening position reflect the recognition of £11.5m of right-of-use assets previously accounted for as operating
leases under IAS 17 together with £4.4m of existing assets held under finance lease arrangements reclassified to the new balance sheet
category of right-of-use assets. Prepayments and accruals in respect of leases recognised on the balance sheet as at 31 August 2019
have been removed and additional lease liabilities of £12.7m have been recognised in respect of leases previously accounted for as
operating leases under IAS 17. Finance lease liabilities of £2.9m have been reclassified from borrowings to leases on transition.
Carr’s Group plc Annual Report and Accounts 2020
137
Notes to the Financial Statements
continued
37 Adoption of IFRS 16 ‘Leases’ continued
To enable users of these accounts to compare the years presented in this Annual Report and Accounts the following table shows the
balance sheet of the Group as at 29 August 2020 as though IAS 17 still applied.
Non-current assets
Property, plant and equipment
Right-of-use assets
Current assets
Trade and other receivables
Current tax assets
Current liabilities
Borrowings
Leases
Trade and other payables
Non-current liabilities
Borrowings
Leases
Deferred tax liabilities
Equity
Retained earnings
Non-controlling interests
Headline figures
Non-current assets
Current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Total shareholders’ equity
Total equity
29 August 2020
(as reported)
£’000
Adjustments
£’000
29 August 2020
(IAS 17)
£’000
38,259
14,856
51,686
1,535
(11,420)
(2,778)
(55,522)
(25,021)
(11,171)
(4,873)
101,202
17,043
127,473
119,870
247,343
(70,814)
(42,360)
(113,174)
134,169
117,126
134,169
4,851
(14,856)
43,110
—
806
(17)
52,492
1,518
(1,259)
2,778
(175)
(1,558)
11,171
(285)
1,029
427
(10,005)
789
(9,216)
1,344
9,328
10,672
1,456
1,029
1,456
(12,679)
—
(55,697)
(26,579)
—
(5,158)
102,231
17,470
117,468
120,659
238,127
(69,470)
(33,032)
(102,502)
135,625
118,155
135,625
The adjustments to the reported figures as at 29 August 2020 reflect the derecognition of right-of-use assets and lease liabilities except
for finance leases that would have been capitalised under IAS 17. It also reinstates prepayments in respect of lease premiums paid at the
commencement of the lease together with prepayments and accruals in respect of the regular lease payments for those leases that
were accounted for as operating leases under IAS 17.
138
Carr’s Group plc Annual Report and Accounts 2020
Strategic Report
Governance
Financial Statements
38 Prior year acquisitions
There were no acquisitions during the current year. To provide users of these financial statements with an understanding of the effect of
acquisitions to the prior year income statement and balance sheet the following disclosures are presented, all of which relate to the year
ended 31 August 2019.
Animax Ltd
On 21 September 2018 Carrs Agriculture Ltd acquired the entire issued share capital of Animax Ltd ("Animax") a producer of market-
leading animal health products, for a total cash consideration of up to £8.5m. As part of the acquisition, Carrs Agriculture Ltd also
acquired the entire issued share capital of Animax’s related party, Clinimax Ltd. Clinimax Ltd is a manufacturer of specialist disinfectant
products for use in the medical industry.
Both businesses were acquired for an initial cash consideration of £6.0m, with an additional cash consideration of up to a maximum of
£2.5m payable over the period to November 2020, based on the achievement of agreed financial targets.
The acquisition of Animax aligns with the Group’s stated strategy of investing in growing agriculture markets in the UK and internationally.
NW Total Engineered Solutions Ltd
On 28 June 2019 Carr’s Engineering Ltd acquired the entire issued share capital of NW Pump & Valve Ltd, the holding company of NW
Engineered Solutions Ltd ("NW Total"), a service and manufacturing company providing value-added solutions to the nuclear defence,
nuclear decommissioning, nuclear power generation and other highly regulated markets, for a total cash consideration of up to £9.6m.
NW Total has been acquired for an initial cash consideration of £6.0m, with further contingent cash consideration of up to a maximum of
£3.6m payable over three years, based on the achievement of agreed financial targets.
The acquisition of NW Total adds a specialist engineering solutions provider to the Group’s Engineering division and will bring a range of
benefits and synergies. NW Total will also benefit significantly from being part of a larger group with access to increased manufacturing
capacity alongside greater financial and technical resources.
Other
On 8 July 2019 Carrs Billington Agriculture (Sales) Ltd acquired the entire issued share capital of Paul Chuter Agricultural Services Ltd
("Paul Chuter") for a cash consideration of £0.4m.
The acquisition expands the existing Agriculture business.
All of the above purchases have been accounted for as acquisitions.
Aggregate disclosures
The total goodwill arising from acquisitions in the prior year ended 31 August 2019 amounted to £7,999,000. Goodwill represents the
excess of the consideration paid over the Group’s interests in the net fair value of the net identifiable assets, liabilities and contingent
liabilities acquired.
The following amounts were recognised within the consolidated income statement for the year ended 31 August 2019 in respect of
acquisitions made in that year:
Revenue
Profit before taxation
Animax
£’000
6,148
429
NW Total
£’000
1,880
352
Other
£’000
117
(34)
Total
£’000
8,145
747
There were no other recognised gains and losses other than the results shown above.
Total acquisition related costs amounted to £630,000, which have been recognised within administrative expenses in the consolidated
income statement for the year ended 31 August 2019 and have been included in business combination expenses within adjusting items
(note 5). £509,000 has been charged to the income statement in the year ended 31 August 2019 and £121,000 has been recognised in
earlier years as incurred.
Carr’s Group plc Annual Report and Accounts 2020
139
38 Prior year acquisitions continued
The assets and liabilities recognised in the acquisition accounting are set out below.
Intangible assets
Property, plant and equipment
Inventories
Receivables
Cash at bank
Payables
Bank loans
Taxation
– Current
– Deferred
Net assets acquired
Goodwill
Satisfied by:
Cash consideration
Contingent consideration
Initial cash consideration comprises:
Enterprise value
Adjustments for:
Profit and normalised working capital
Cash and debt like items
Total initial cash consideration
Fair
value
Animax
£’000
3,017
1,868
948
1,355
1,430
(1,268)
(340)
34
(680)
6,364
1,742
Fair
value
NW Total
£’000
3,520
279
267
1,210
4,246
(2,571)
(120)
(333)
(633)
5,865
6,234
Fair
value
Other
£’000
67
69
258
132
147
(189)
—
(54)
(15)
415
23
Total
fair
value
£’000
6,604
2,216
1,473
2,697
5,823
(4,028)
(460)
(353)
(1,328)
12,644
7,999
8,106
12,099
438
20,643
6,000
2,106
8,868
3,231
8,106
12,099
438
—
438
15,306
5,337
20,643
Fair value
Animax
£’000
Fair value
NW Total
£’000
Fair value
Other
£’000
Total
fair value
£’000
6,000
6,000
438
12,438
—
—
555
2,313
—
—
555
2,313
6,000
8,868
438
15,306
The contingent consideration and £124,000 of cash consideration remained unpaid at the year ended 31 August 2019. Intangible assets
represents the fair value of IP, brand names and customer relationships.
Pro forma full year information (year ended 31 August 2019)
IFRS 3 (revised) requires disclosure of information as to the impact on the financial statements if the acquisitions had occurred at the
beginning of the accounting year.
The unaudited pro forma summary below presents the Group as if the acquisitions had been acquired on 2 September 2018.
The pro forma amounts include the results of the acquisitions and the interest expense on the increase in net debt as a result of the
acquisitions. The pro forma amounts do not include any possible synergies from the acquisition. The pro forma information is provided
for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily
indicative of future results.
Year ended 31 August 2019:
Revenue
Profit before taxation
£’000
414,536
17,406
140
Carr’s Group plc Annual Report and Accounts 2020
Notes to the Financial Statementscontinued
Five Year Statement
Continuing operations
Revenue and results
Revenue
Operating profit
Analysed as:
Adjusted operating profit
Adjusting items
Operating profit
Finance income
Finance costs
Profit before taxation
Analysed as:
Adjusted profit before taxation
Adjusting items
Profit before taxation
Taxation
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Ratios (continuing operations)
Operating margin (excluding adjusting items)1
Return on net assets (excluding adjusting items)
Earnings per share – basic
– adjusted
Dividends per ordinary share
Strategic Report
Governance
Financial Statements
(Restated)1
2016
£’000
(Restated)1
2017
£’000
2018
£’000
2019
£’000
2020
£’000
314,907 346,224
403,192 403,905 395,630
14,851
10,690
16,405
17,195
13,840
15,063
(212)
12,091
(1,401)
17,464
(1,059)
18,930
(1,735)
16,247
(2,407)
14,851
10,690
16,405
17,195
13,840
236
(1,009)
176
(864)
358
(1,261)
463
(1,349)
313
(1,656)
14,078
10,002
15,502
16,309
12,497
14,290
(212)
14,078
(2,907)
11,171
2,817
11,403
(1,401)
10,002
(1,707)
16,561
(1,059)
15,502
(1,855)
18,044
(1,735)
16,309
(2,685)
14,904
(2,407)
12,497
(1,575)
8,295
13,647
13,624
10,922
—
—
—
—
13,988
8,295
13,647
13,624
10,922
4.8%
13.0%
10.7p
10.9p
3.8p
3.5%
10.8%
7.7p
8.9p
4.0p
4.3%
13.7%
13.0p
13.9p
4.5p
4.7%
13.8%
13.1p
14.6p
4.75p
4.1%
11.1%
10.3p
11.9p
4.75p
1 Restated for the reclassification to operating profit of the share of post-tax results of the associate and joint ventures.
Carr’s Group plc Annual Report and Accounts 2020
141
Five Year Statement
continued
Net assets employed
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Investment property
Investments
Financial assets
– Non-current receivables
Retirement benefit asset
Deferred tax assets
Current assets
Inventories
Contract assets
Trade and other receivables
Current tax assets
Financial assets
– Derivative financial instruments
– Cash and cash equivalents
Total assets
Current liabilities
Financial liabilities
– Borrowings
– Leases
– Derivative financial instruments
Contract liabilities
Trade and other payables
Current tax liabilities
Non-current liabilities
Financial liabilities
– Borrowings
– Leases
Deferred tax liabilities
Other non-current liabilities
Total liabilities
Net assets
2016
£’000
(Restated)1
2017
£’000
2018
£’000
2019
£’000
2020
£’000
11,440
286
35,811
—
182
14,996
50
311
—
24,293
2,266
37,149
—
176
18,106
444
5,209
—
24,272
2,223
38,484
—
170
21,207
21
10,146
—
32,877
9,318
41,917
—
164
23,139
22
7,769
410
32,041
9,171
38,259
14,856
158
24,931
20
8,037
—
63,076
87,643
96,523
115,616
127,473
33,423
—
56,940
303
37,023
—
59,723
297
42,371
—
67,516
119
46,270
9,466
56,349
—
—
48,411
13
23,887
26
24,632
—
28,649
40,961
8,114
51,686
1,535
3
17,571
139,077
120,943
134,664
140,734
119,870
202,153 208,586
231,187 256,350 247,343
(21,642)
—
(20)
—
(46,823)
(470)
(17,060)
—
(18)
—
(56,181)
(673)
(34,994)
—
—
—
(64,290)
(175)
(23,856)
—
—
(1,269)
(62,653)
(1,010)
(11,420)
(2,778)
—
(1,061)
(55,522)
(33)
(68,955)
(73,932)
(99,459)
(88,788)
(70,814)
(18,625)
—
(1,817)
(2,668)
(20,966)
—
(4,010)
(3,755)
(4,997)
—
(3,981)
(1,784)
(28,586)
—
(4,987)
(2,999)
(25,021)
(11,171)
(4,783)
(1,385)
(23,110)
(28,731)
(10,762)
(36,572)
(42,360)
(92,065)
(102,663)
(110,221) (125,360)
(113,174)
110,088
105,923
120,966
130,990
134,169
1 Restated for the finalisation of the fair value acquisition accounting for NuVision Engineering, Inc.
142
Carr’s Group plc Annual Report and Accounts 2020
Alternative Performance Measures Glossary
Strategic Report
Governance
Financial Statements
The Annual Report and Accounts includes alternative performance measures (“APMs”), which are not defined or specified under the
requirements of IFRS. These APMs are consistent with how business performance is measured internally and therefore the Directors
believe that these APMs provide stakeholders with additional useful information on the Group's performance.
Alternative performance measure
Definition and comments
Adjusted EBITDA
Adjusted operating profit
Adjusted profit before
taxation
Earnings before interest, tax, depreciation, amortisation, profit/(loss) on the disposal of non-current
assets, share of post-tax results of the associate and joint ventures and excluding items regarded by the
Directors as adjusting items. This measure is reconciled to statutory operating profit and statutory profit
before taxation in note 2. EBITDA allows the user to assess the profitability of the Group's core operations
before the impact of capital structure, debt financing and non-cash items such as depreciation and
amortisation.
Operating profit after adding back items regarded by the Directors as adjusting items. This measure is
reconciled to statutory operating profit in the income statement and note 2. Adjusted results are
presented because if included, these adjusting items could distort the understanding of the Group's
performance for the year and the comparability between the years presented.
Profit before taxation after adding back items regarded by the Directors as adjusting items. This measure
is reconciled to statutory profit before taxation in the income statement and note 2. Adjusted results are
presented because if included, these adjusting items could distort the understanding of the Group's
performance for the year and the comparability between the years presented.
Adjusted earnings per share Profit attributable to the equity holders of the Company after adding back items regarded by the
Adjusted diluted earnings
per share
Net debt
Underlying sales
growth/decline
Free cash flow
Gross margin
Adjusted Group
operating margin
Return on net assets
Directors as adjusting items after tax divided by the weighted average number of Ordinary Shares in
issue during the year. This is reconciled to basic earnings per share in note 10.
Profit attributable to the equity holders of the Company after adding back items regarded by the
Directors as adjusting items after tax divided by the weighted average number of Ordinary Shares in
issue during the year adjusted for the effects of any potentially dilutive options. Diluted earnings per
share is shown in note 10.
The net position of the Group's and Company’s cash at bank and borrowings. Details of the movement in
net debt is shown in note 32.
Year-on-year increase/(decrease) in sales revenue excluding the impact of acquisitions and disposals.
This performance measure allows the user to have a clearer understanding of the organic sales growth/
decline of the Group. A reconciliation of underlying sales growth/decline to reported revenue is shown
below.
Cash generated from operating activities less maintenance capital expenditure. The calculation of free
cash flow is shown below. Free cash flow demonstrates how much cash is available for the Group to
utilise for expansionary capital investment, paying dividends, or financing/repaying borrowings.
Reported gross profit as a percentage of reported revenue. Gross margin is a reflection of how
successfully the Group manages raw material price volatility and its selling prices in competitive
markets. A calculation of gross margin is shown below.
Operating profit after adding back items regarded by the Directors as adjusting items as a percentage of
revenue. Adjusted Group operating margin excluding adjusting items is presented because if included,
these items could distort the understanding of the Group’s performance for the year and the
comparability between the years presented. The calculation of adjusted Group operating margin to the
statutory equivalent is shown below.
Profit before tax after adding back items regarded by the Directors as adjusting items as a percentage of
net assets. This financial performance metric allows users to understand how effectively and efficiently
the Group is using its assets to generate earnings. The calculation of return on net assets is shown below.
Ratio of net debt to EBITDA
The ratio of net debt to EBITDA is a measurement of leverage and reflects the Group’s ability to service
its debt. The calculation of net debt to EBITDA is shown below.
Carr’s Group plc Annual Report and Accounts 2020
143
Alternative Performance Measures Glossary
continued
The following tables show reconciliations and calculations that are not presented elsewhere in this Annual Report and Accounts.
Underlying sales growth/decline
Reported revenue
NW Total
Underlying revenue
2020
£’000
2019
£’000
395,630 403,905
(1,880)
(11,740)
Change
-2.0%
383,890 402,025
-4.5%
The impact on year-on-year organic revenue growth/decline of other acquisitions in the comparative year are immaterial and have
therefore not been included in the calculation of underlying sales growth/decline.
Free cash flow
Cash generated from operating activities per the consolidated statement of cash flows
Maintenance capital expenditure
Free cash flow
Gross margin
Reported revenue
Reported gross profit
Gross profit as a percentage of revenue
Adjusted Group operating margin
Reported operating profit
Adjusting items (note 5)
Adjusted operating profit
Reported revenue
Adjusted operating profit as a percentage of reported revenue
Return on net assets
Reported profit before taxation
Adjusting items (note 5)
Adjusted profit before taxation
Net assets per the consolidated balance sheet
Adjusted profit before taxation as a percentage of net assets
Ratio of net debt to EBITDA
Adjusted EBITDA (note 2)
Net debt excluding leases (note 32)
Ratio of net debt excluding leases to adjusted EBITDA
144
Carr’s Group plc Annual Report and Accounts 2020
2020
£’000
2019
£’000
18,060
(5,372)
12,600
(3,670)
Change
+43.3%
12,688
8,930
+42.1%
2020
£’000
2019
£’000
395,630 403,905
54,107
13.4%
52,249
13.2%
Change
-2.0%
2020
£’000
13,840
2,407
2019
£’000
17,195
1,735
16,247
18,930
395,630 403,905
4.7%
4.1%
Change
-19.5%
-14.2%
2020
£’000
12,497
2,407
14,904
134,169
11.1%
2019
£’000
16,309
1,735
18,044
130,990
13.8%
Change
-23.4%
-17.4%
2020
£’000
20,771
18,870
0.91
2019
£’000
21,156
20,870
0.99
Change
-1.8%
Directory of Operations
Strategic Report
Governance
Financial Statements
Carr’s Group plc
Old Croft, Stanwix, Carlisle,
Cumbria CA3 9BA
Tel: 01228 554600
Web: www.carrsgroup.com
AGRICULTURE
ACC Feed Supplement LLC*
5101 Harbor Drive,
Sioux City, Iowa 51111 USA
Tel: 001 712 255 6927
Afgritech LLC*
810 Waterman Drive, Watertown,
New York 13601 USA
Tel: 001 315 785 3625
AminoMax
Lansil Way, Lancaster
LA1 3QY
Tel: 01524 597 200
Animal Feed Supplement, Inc.
East Highway 212, PO Box 188,
Belle Fourche, South Dakota
57717 USA
Tel: 001 605 892 3421
Animal Feed Supplement, Inc.
PO Box 105, 101 Roanoke Avenue,
Poteau, Oklahoma 74953 USA
Tel: 001 918 647 8133
Animal Feed Supplement, Inc.
PO Box 569, 1700 US, 50 East,
Silver Springs, Nevada 89429 USA
Tel: 001 775 577 2002
Animax Limited
Shepherds Grove West, Stanton,
Bury St Edmund’s, Suffolk
IP31 2AR
Tel: 01359 252 181
Animax NZ Limited
86 Highbrook Drive, Auckland
2013, New Zealand
Bibby Agriculture*
Priory House, Priory Street,
Carmarthen
SA31 1NE
Tel: 01267 232 041
Bibby Agriculture*
1A Network House, Badgers Way,
Oxon Business Park, Shrewsbury,
Shropshire
SY3 5AB
Tel: 01743 237 890
Caltech
Solway Mills, Silloth, Wigton,
Cumbria
CA7 4AJ
Tel: 016973 32592
Carr’s Billington Agriculture
(Operations)**
Warren Road, Brecon, Powys
LD3 8EF
Tel: 01874 623470
Carr’s Billington Agriculture
(Operations)**
Parkhill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EX
Tel: 01228 518860
Carr’s Billington Agriculture
(Operations)**
Lansil Way, Lancaster
LA1 3QY
Tel: 01524 597 200
Carr’s Billington Agriculture
(Operations)**
High Mill, Langwathby, Penrith
CA10 1NB
Tel: 01228 518 860
Carr’s Billington Agriculture
(Operations)**
Lion Works, Pool Road, Newtown,
Powys SY16 3AG
Tel: 01686 626680
Carr’s Billington Agriculture
(Operations)**
Cold Meece, Stone, Staffordshire
ST15 0QW
Tel: 01785 760 535
Carr’s Billington Agriculture
(Operations)**
Micklow House Farm, Eccleshall
Road, Stone, Staffordshire
ST15 0BY
Tel: 01782 374387
Carr’s Billington Agriculture
(Operations)**
Cilherwydd Store, Llanboidy,
Whitland, Carmarthenshire
SA34 0LL
Tel: 01994 448209
Carr’s Billington Agriculture
(Operations)**
Pow Hill, Kirkbride, Wigton,
Cumbria
CA7 5LF
Tel: 01697 352229
Carr’s Billington Agriculture
(Sales) Annan
2 Annan Business Park, Annan,
Dumfriesshire
DG12 6TZ
Tel: 01461 202772
Carr’s Billington Agriculture
(Sales) Appleby
Crosscroft Industrial Estate,
Appleby, Cumbria
CA16 6HX
Tel: 01768 352999
Carr’s Billington Agriculture
(Sales) Ayr
1A Whitfield Drive,
Heathfield Industrial Estate,
Ayr, Ayrshire
KA8 9RX
Tel: 01292 263635
Carr’s Billington Agriculture
(Sales) Ayr
Livestock Auction Mart,
Whiteford Hill, Ayr
KA6 5JW
Tel: 01292 619229
Carr’s Billington Agriculture
(Sales) Bakewell
Unit 4-6, Kingfisher Building,
Buxton Road, Bakewell,
Derbyshire
DE45 1GZ
Tel: 01629 814126
Carr’s Billington Agriculture
(Sales) Balloch
Ballagan, Stirling Road, Balloch
G83 8LY
Tel: 01389 752800
Carr’s Billington Agriculture
(Sales) Barnard Castle
Montalbo Road, Barnard Castle,
Durham
DL12 8ED
Tel: 01833 637537
Carr’s Billington Agriculture
(Sales) Brecon
Warren Road Stores, Warren
Road, Brecon, Powys
LD3 8EF
Tel: 01874 623470
Carr’s Billington Agriculture
(Sales) Brock
Brockholes Way, Claughton
Trading Estate, Lancaster Old
Road, Claughton on Brock,
Preston
PR3 0PZ
Tel: 01995 643 200
Carr’s Billington Agriculture
(Sales) Carlisle
Montgomery Way, Rosehill Estate,
Carlisle
CA1 2UY
Tel: 01228 520212
Carr’s Billington Agriculture
(Sales) Cockermouth
Unit 5, Lakeland Agricultural
Centre, Cockermouth
CA13 0QQ
Tel: 01900 824 105
Carr’s Billington Agriculture
(Sales) Gisburn
Pendle Mill, Mill Lane, Gisburn,
Clitheroe, Lancashire
BB7 4ES
Tel: 01200 445 491
Carr’s Billington Agriculture
(Sales) Hawes
Burtersett Road, Hawes,
North Yorkshire
DL8 3NP
Tel: 01969 667334
Carr’s Billington Agriculture
(Sales) Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 605371
Carr’s Billington Agriculture
(Sales) Jedburgh
Mounthooly, Crailing, Jedburgh
TD8 6TJ
Tel: 01835 850250
Carr’s Billington Agriculture
(Sales) Kendal
Unit 1, J36, Rural Auction Centre,
Crooklands, Milnthorpe, Kendal,
Cumbria
LA7 7FP
Tel: 01539 566035
Carr’s Billington Agriculture
(Sales) Leek
Macclesfield Road, Leek,
Staffordshire
ST13 8NR
Tel: 01538 383277
Carr’s Billington Agriculture
(Sales) Milnathort
Stirling Road, Milnathort, Kinross
KY13 9UZ
Tel: 01577 862381
Carr’s Billington Agriculture
(Sales) Morpeth
Unit 20c, Coopies Lane
Industrial Estate, Morpeth,
Northumberland
NE61 6JN
Tel: 01670 503930
Carr’s Billington Agriculture
(Sales) Morpeth
Old Station Buildings, Coopies
Lane, Morpeth, Northumberland
NE61 2SL
Tel: 01670 518474
Carr’s Billington Agriculture
(Sales) Oban
Unit 3 Oban Livestock Centre
Soroba, Oban, Argyll
PA34 4SD
Tel: 01631 566279
Carr’s Billington Agriculture
(Sales) Penicuik
4 Eastfield Park Road, Penicuik,
Midlothian,
EH26 8EZ
Tel: 01968 707040
Carr’s Billington Agriculture
(Sales) Penrith
Haweswater Road, Penrith
Industrial Estate, Penrith,
Cumbria
CA11 9EU
Tel: 01768 866354
Carr’s Billington Agriculture
(Sales) Rothbury
The Store, Coquet View,
Rothbury, Morpeth,
Northumberland,
NE65 7RZ
Tel: 01669 620320
Carr’s Billington Agriculture
(Sales) Skipton
Skipton Auction Mart, Gargrave
Road, Skipton, North Yorkshire
BD23 1UD
Tel: 01756 792166
Carr’s Billington Agriculture
(Sales) Spennymoor
Southend Works, Byers Green,
Spennymoor, Durham
DL16 7NL
Tel: 01388 662266
Carr’s Billington Agriculture
(Sales) Stirling
Stirling Agricultural Centre,
Stirling
FK9 4RN
Tel: 01786 474826
Carr’s Billington Agriculture
(Sales) Wigton
Hopes Auction Co Ltd, Skye Road,
Wigton, Cumbria,
CA7 9NS
Tel: 016973 45874
Carr’s Billington Agriculture
(Sales) Wooler
Bridge End, South Road, Wooler,
Northumberland,
NE71 6QE
Tel: 01668 281567
Carr’s Billington Fuels Carlisle
Kingstown Broadway, Kingstown
Industrial Estate, Carlisle
CA3 0HA
Tel: 01228 534 342
Carr’s Billington Fuels Castle
Douglas
Abercromby Industrial Park,
Castle Douglas, Dumfriesshire,
DG7 1BA
Tel: 01387 750747
Carr’s Billington Fuels Dumfries
Dargavel Stores, Lockerbie Road,
Dumfries, Dumfriesshire
DG1 3PG
Tel: 01387 750747
Carr’s Billington Fuels
Cockermouth
Lakeland Agricultural Centre
Cockermouth, Cumbria
CA13 0QQ Tel: 01900 828800
Carr’s Billington Fuels Hexham
Tyne Mills Industrial Estate,
Hexham, Northumberland
NE46 1XL
Tel: 01434 600404
Carr’s Billington Fuels Lancaster
Lancaster Mill, Lansil Way
Lancaster, Lancashire
LA1 3QY
Tel: 01524 599333
Carr’s Billington Fuels Penrith
High Mill, Langwathby, Penrith,
Cumbria
CA10 1NB
Tel: 01768 889899
Carr’s Billington Fuels Stranraer
Droughduil, Dunragit, Stranraer
DG9 8QA
Tel: 01387 750747
Carr’s Supplements (NZ) Limited
515a Wairakei Road, Burnside,
Christchurch, 8053, New Zealand
Tel: 0064 03 974 9274
Crystalyx Products GmbH*
Am Stau 199-203, 26122,
Oldenburg, Germany
Tel: 00 49 441 2188 92142
Gold-Bar Feed Supplements
LLC*
783 Eagle Boulevard, Shelbyville
TN 37160, USA
Tel: 001 877 618 6455
Scotmin
13 Whitfield Drive, Heathfield
Industrial Estate, Ayr
KA8 9RX
Tel: 01292 280 909
Silloth Storage Company*
Station Road, Silloth,
Wigton, Cumbria
CA7 4JQ
Workware
Kingstown Broadway, Kingstown
Industrial Estate, Carlisle
CA3 0HA
Tel: 01228 591 091
ENGINEERING
Bendalls Engineering
Brunthill Road, Kingstown
Industrial Estate, Carlisle
CA3 0EH Tel: 01228 815 350
Carrs MSM
Unit 1, Oak Tree Business Centre,
Spitfire Way, Hunts Rise,
South Marston Park, Swindon,
Wiltshire
SN3 4TX
Tel: 01793 824 891
Chirton Engineering
Unit 4A, Tyne Tunnel Trading
Estate, High Flatworth,
North Shields, Tyne and Wear
NE29 7SW
Tel: 0191 296 2020
NuVision Engineering, Inc.
2403 Sidney Street, Suite 700,
Pittsburgh, Pennsylvania 15203,
USA
Tel: 001 888 748 8232
NuVision Engineering, Inc.
184 B Rolling Hill Road,
Mooresville, North Carolina 28117,
USA
Tel: 001 704 799 2707
NW Total Engineered Solutions
Limited
Unit 2 Andrews Way, Barrow in
Furness, Cumbria
LA14 2UE
Tel: 01229 811000
R Hind Bendalls
Kingstown Broadway, Kingstown
Industrial Estate, Carlisle
CA3 0HA Tel: 01228 523 647
Wälischmiller
Engineering GmbH
Schießstattweg 16, 88677
Markdorf, Germany
Tel: 0049 7544 95140
* joint venture company
** associate company
Carr’s Group plc Annual Report and Accounts 2020
145
Dormant Subsidiaries at 29 August 2020
Company Name
B. E. Williams Ltd1
B.R.B Trust Ltd1
Caltech Biotechnology Ltd1
Carrs Animal Feed Supplements Ltd1
Carrs Feeds Ltd1
Carrs Fertilisers Ltd1
Carr’s Group Corporate Trustee Ltd
Carr’s International Industries Ltd1
Carr’s Milling Industries Ltd1
Carrs Milling Ltd1
Carrs Natural Feeds Ltd1
Carr's Supplements (ROI) Ltd
Chirton Engineering Ltd
Forsyths of (Wooler) Ltd1
Greens Flour Mills Ltd1
Horse and Pet Warehouse Ltd
Johnstone Fuels and Lubricants Ltd1
NW Pump & Valve Ltd1
Paul Chuter Agricultural Services Ltd
Pearson Farm Supplies Ltd
Phoenix Feeds Ltd
R Hind Ltd1
Reid and Robertson Ltd1
Robert Hutchison Ltd1
Safe at Work Ltd1
Scotmin Nutrition Ltd1
Simarghu Ltd1
Walischmiller Solutions Ltd1
Wallace Oils Ltd1
WM. Nicholls & Company (Crickhowell) Ltd1
Registered and Located
Ownership
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Republic of Ireland
England and Wales
England and Wales
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
51%2
100%
100%
100%
51%2
100%
100%
100%
100%
100%
100%
100%
100%
51%2
100%
51%2
51%2
100%
51%2
51%2
51%2
100%
51%2
100%
51%2
100%
51%2
100%
51%2
51%2
1 Dissolution process commenced prior to 29 August 2020 and officially dissolved post-year end.
2
100% owned by Carrs Billington Agriculture (Sales) Ltd which is a 51% subsidiary of Carr’s Group plc.
Companies registered in England and Wales have a registered office of Old Croft, Stanwix, Carlisle, Cumbria CA3 9BA. Companies
registered in Scotland have a registered office of 13 Whitfield Drive, Heathfield Ind. Est., Ayr KA8 9RX, with the exception of Horse and
Pet Warehouse Ltd which has a registered office of 1a Whitfield Drive, Heathfield Ind. Est., Ayr KA8 9RX. Companies registered in the
Republic of Ireland have a registered office of Trinity House, Charleston Road, Ranelagh, Dublin 6 D06C8X4.
146
Carr’s Group plc Annual Report and Accounts 2020
Registered Office and Advisers
Strategic Report
Governance
Financial Statements
Registered Office
Carr’s Group plc
Old Croft, Stanwix,
Carlisle
CA3 9BA
Registered No. 98221
Chartered Accountants and Statutory Auditors
KPMG LLP
Quayside House,
110 Quayside,
Newcastle upon Tyne
NE1 3DX
Bankers
Clydesdale Bank PLC
82 English Street,
Carlisle
CA3 8HP
The Royal Bank of Scotland PLC
Glasgow City Office,
10 Gordon Street,
Glasgow
G1 3PL
Financial Adviser and Broker
Investec Bank (UK) Ltd
30 Gresham Street,
London
EC2V 7QP
Financial and Corporate PR Advisers
Powerscourt
1 Tudor Street,
London
EC4Y 0AH
Solicitors
Hill Dickinson LLP
1 St Paul’s Square,
Liverpool
L3 9SJ
Registrar
Link Asset Services
The Registry,
34 Beckenham Road,
Beckenham,
Kent
BR3 4TU
Carr’s Group plc Annual Report and Accounts 2020
147
Notes
148
Carr’s Group plc Annual Report and Accounts 2020
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2
0
Carr’s Group plc
Old Croft
Stanwix
Carlisle CA3 9BA
United Kingdom